Oil product demand in OECD Asia (Japan, Korea and Australia) was 32 thousand b/d lower y/y in August, as declines in Japan (-0.19 mb/d y/y) and Australia (-32 thousand b/d y/y) were almost offset by an uptick in Korea (+0.18 mb/d y/y). Japanese oil demand continued to trend down amid trade tensions with Korea, where demand benefitted by the 7% tax cut on fuel in place since May. However, Korean demand lost this support on 1 September as the tax cuts were reversed. Fuel taxes account for 55% of gasoline, 50% of gasoil and 30% of butane prices in Korea.
Regional diesel demand rose by 68 thousand b/d y/y, led by Korea (+66 thousand b/d y/y), with Manufacturing PMI values coming in higher on the back of a pick-up in manufacturing activity. With the exception of Australia, falling industrial activity, reflected in falling PMI values in September, is likely to have weighed on diesel demand. Gasoline demand rose by 25 thousand b/d y/y, buoyed by Korea, despite slightly higher m/m pump prices. Fuel oil demand continued to trend downwards, falling by 97 thousand b/d y/y. Japan led the losses amid persistent bunkering weakness and substitution by nuclear and LNG.
Lower cracker maintenance (-23 thousand tonnes of ethylene capacity offline y/y) and a $232/t m/m increase in naphtha cracking margins pushed demand for naphtha across OECD Asia higher by 49 thousand b/d y/y. Korea led the increase (+44 thousand b/d y/y). LPG demand was broadly flat y/y, as a 70 thousand b/d y/y decline in Japanese demand on the back of slightly warmer temperatures was offset by a 66 thousand b/d y/y increase in Korean consumption. Flexible crackers maximised throughput as tax cuts supported the autogas segment. Significantly lower cracker maintenance (-0.12 Mt of ethylene capacity offline y/y) in September set the petrochemical complex up for a strong month, although higher prices due to the attacks on Saudi oil infrastructure may have tempered demand.
Refinery runs increased by 80 thousand b/d y/y to 6.91 mb/d in August on the back of strong margins. Crude imports fell by 0.3 mb/d y/y to 6.6 mb/d, again led by Japan (-0.29 mb/d y/y). Product exports were lower by 0.1 mb/d y/y as jet fuel exports tumbled (-0.11 mb/d y/y). August again saw a second consecutive month of record-high Australian condensate production, which was up by 68 thousand b/d y/y to 0.25 mb/d. Ichthys condensate prices hit record highs in September as attacks on Saudi facilities pushed Asian buyers to secure alternatives to Arab Light and Arab Extra Light volumes. Total product stocks across OECD Asia fell by 0.64 mb m/m to 62 mb in August, while crude stocks rose by 6.8 mb m/m to 56.6 mb.