Japanese oil demand declined by 0.2 mb/d y/y to 2.88 mb/d in May, as US–China trade tensions dampened sentiment across the region, weakening economic activity and exports. Fuel oil led the way, with demand down by 60 thousand b/d y/y due to persistent weakness in the bunker fuel segment. Gasoline demand was also lower, by 50 thousand b/d y/y, as higher crude prices helped push retail prices to their highest since October 2018. Consumer sentiment remained weak as jet fuel demand fell by 47 thousand b/d y/y despite a 10-day national holiday being declared to mark the enthronement of Emperor Naruhito. Demand for naphtha and LPG slid by 21 thousand b/d y/y each as the return of crackers from maintenance failed to lift activity in the petrochemical sector amid weak margins. Lower y/y maintenance in June and a pick-up in margins is set to provide some support to feedstock demand. Diesel demand was higher by 13 thousand b/d y/y despite the manufacturing PMI falling to 49.8 in May and 49.5 in June.
Refinery runs fell by 42 thousand b/d y/y in May, to 2.78 mb/d, despite refinery maintenance being 77 thousand b/d lower y/y. Crude imports increased by 63 thousand b/d y/y (2%) to 3.0 mb/d, as lower volumes from Iran (-0.21 mb/d y/y) and Saudi Arabia (-0.15 mb/d y/y) were offset by higher UAE volumes (+0.41 mb/d y/y). May saw Japanese buyers halt all imports of Iranian crude, while Kuwait and Bahrain increased their exports to Japan by 23% and 13% respectively y/y. Product stocks rose by 4.7 mb m/m, driven by naphtha (+1.59mb m/m) and LPG (+1.58 mb m/m), while crude stocks increased by 7.9 mb m/m due to higher imports and lower runs.