Japan oil data - February 2014

Published at 10:26 31 Mar 2014 by . Last edited 11:17 22 Aug 2019.

Japanese oil demand rose m/m by over 0.2 mb/d to 4.80 b/d in February, and was only marginally lower y/y. As we noted last month, this was due to the late arrival of winter, with HDDs 3% higher than the five-year average. This eased the declines in fuel oil demand, which picked up m/m to 0.49 mb/d, and resulted in crude burn reaching 0.28 mb/d, the highest level since January 2013. While Japan has been able to back out fuel oil from power generation in recent months thanks to coal and increased LNG purchases, with spot LNG prices well above fuel oil through winter, Japanese utilities switched to direct burning of crude oil, especially with widespread feedstock availability. Naphtha demand also remained strong, higher y/y by 82 thousand b/d to 0.88 mb/d, due to relatively higher ethylene spot prices, but we expect this demand to decline in the near-term amid cracker turnarounds. A colder March (HDDs higher y/y by 6%) should have supported demand this month, although average temperatures and a slowing economy could weigh on oil demand in the coming months.

Japanese refinery runs picked up slightly m/m to 3.71 mb/d, lower y/y by just 70 thousand b/d, despite TAR at the Marifu refinery cutting runs by 71 thousand b/d, and a 74 thousand b/d CDU at the Nishihara refinery being offline until 12 March. End-March sees the official closure of 0.4 mb/d of CDU capacity, although the majority was already idle or at low utilisation rates. Still, with nearly 0.8 mb/d of capacity offline in May, and 0.6 mb/d in June, runs are likely to fall below 3 mb/d. This should support Asian fuel oil markets in Q2 14, with Idemitsu Kosan expecting to start importing bunker fuel to the site of its recently shut Tokuyama refinery. Japanese crude imports fell m/m by 0.48 mb/d in February, but imports from Iran rose m/m by 50 thousand b/d.

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