Australia’s oil product demand fell y/y for the sixth straight month, by 34 thousand b/d to 1.06 mb/d. May’s decline was the largest in the past 25 months and was driven again by weakness in gasoline (-11 thousand b/d y/y). Slowing wage growth and falling home prices are eroding spending power and hurting household consumption, which accounts for 56% of the country’s GDP. Financial markets are expecting Australia’s central bank to cut interest rates, which are already at a record low, for the third time this year. This may add further pressure to the Australian dollar—currently near a three-year low—and drive up pump prices. Jet demand also fell by 2 thousand b/d y/y because of weak consumer sentiment. Diesel demand fell y/y for the third time over the past four months, by 10 thousand b/d, hurt by weaker mining demand with BHP and Rio Tinto both downgrading their iron ore production forecasts for 2019 after damage caused by Cyclone Veronica in late-March. LPG demand fell by 5 thousand b/d y/y while demand for fuel oil and other products was lower y/y by 7 thousand b/d.
Refinery runs fell by 10 thousand b/d y/y to 0.50 mb/d on weak margins. Liquids production grew by 91 thousand b/d y/y (10 thousand b/d of crude and 81 thousand b/d of condensate) to 0.33 mb/d. The government estimates it will grow to 0.41 mb/d in the fiscal year ending 30 June 2020 due to rising condensate production from Ichthys and Prelude projects. Product imports fell by 26 thousand b/d y/y to 0.63 mb/d, mainly due to gasoline (-21 thousand b/d y/y). LPG exports fell to zero from a record high of 94 thousand b/d in April. Inventories of gasoline, jet and diesel all rose m/m to multi-month highs. Crude stocks fell m/m by 0.1 mb.