Although milder temperatures meant that Japanese oil demand eased m/m to 4.73 mb/d, it nonetheless surprised to the upside, with y/y growth flat. Indeed, early indications had pointed to a weak January, with electricity generation down y/y by 1.7%, a weakening economy and higher gas consumption. In fact, data from the top 10 utilities had pegged fuel oil consumption increasing y/y by 11.2% but crude burn falling y/y by 16.7%, the sharpest decline in three years. Nonetheless, final data showed a much smaller decline in crude burn, down y/y by just 6 thousand b/d to 0.3 mb/d, while fuel oil demand increased by 36 thousand b/d to 0.53 mb/d. Naphtha demand remained strong, up y/y by 23 thousand b/d to 0.82 mb/d. Gasoil and kerosene demand growth were in positive territory, compensating for another set of weak readings in gasoline and LPG. We still expect Japanese oil demand growth to ease this year by 0.1 mb/d y/y, as new LNG facilities come online, although a 1% m/m pick up in IP shows some signs of bottoming out in the economic backdrop and could lend support to oil demand.
Japanese refinery runs picked up by 28 thousand b/d m/m to 3.709 mb/d, broadly flat y/y, as refineries continued to ramp up output following the return from maintenance in November, despite the 0.22 mb/d Chiba refinery remaining offline. Crude oil imports bounced back above 4 mb/d, higher y/y by 0.15 mb/d, with imports from Iran picking up m/m to 0.24 mb/d, contrary to the customs-cleared crude oil imports data which placed January imports from Iran at a three month low. Crude inventories built m/m but product stocks declined by the same amount, offsetting each other, with total stocks lower than the five year average by 3.6 mb.