Australia’s oil product demand fell y/y in June for a seventh straight month, by 36 thousand b/d to 1.03 mb/d. Diesel led the decline, dropping y/y by 18 thousand b/d to 0.51 mb/d, as the country’s manufacturing PMI at 49.4 showed the first signs of contraction in three years. We expect July diesel demand to have rebounded m/m as the July manufacturing PMI rose back above 50, but weak demand from the mining sector will continue to weigh on y/y growth. Gasoline demand fell y/y in June by 9 thousand b/d to 0.29 mb/d as the weak value of the Australian dollar continues to boost pump prices. The market remains fixated on whether Australia’s central bank (RBA) will decide to cut interest rates further this year from the current record low of 1%. The RBA decided against cutting the rate for a third straight month in August, providing a floor to the currency. Jet demand fell marginally y/y by 1 thousand b/d to 0.16 mb/d.
Refinery runs were flat y/y in June at 0.51 mb/d, marking the first time since February that runs have not declined. Product imports fell y/y by 22 thousand b/d to 0.59 mb/d, led by jet, which was down y/y by 29 thousand b/d to 75 thousand b/d. Australia’s stocks of refined products fell m/m by 0.6 mb to 32.1 mb, while crude stocks dropped m/m by 0.3 mb to 12.6 mb, to the lowest since March. The Australian government is in discussions with the US government over the potential to access the US SPR as part of Australia’s efforts to meet its IEA obligations, which it has consistently fallen short of since 2012. Australian crude production grew y/y by 14 thousand b/d to 0.13 mb/d, while total crude and condensate production rose y/y by 91 thousand b/d to 0.36 mb/d, the highest since June 2014 as LNG projects ramp up.