Japan oil data – March 2014

Published at 11:02 30 Apr 2014 by . Last edited 11:17 22 Aug 2019.

Japanese oil demand eased m/m by 0.3 mb/d, less than the seasonal average of around 0.45 mb/d, to 4.42 mb/d. This led to a y/y increase of 0.12 mb/d, only the second growth in 14 months, limiting the Q1 14 y/y decline to just 0.6%. March's strength was due to resilient demand for crude burn and fuel oil, which remained flat y/y at 0.2 mb/d and 0.41 mb/d, supported by the late arrival of winter (HDDs were 8.8% higher y/y), plentiful feedstock availability and higher spot LNG prices ($5/mmbtu higher than fuel oil). Support also came from gasoline demand, which climbed back above 1 mb/d, and middle distillates. Naphtha demand, however, fell back m/m by 0.16 mb/d, in line with our estimates, due to cracker turnarounds. We expect naphtha demand to remain weak in the near term, with a further 0.89 Mt and 1.1 Mt of cracking capacity shut in May and June. Also, warmer temperatures in April (15% fewer HDDs y/y), the shut-down of six oil fired plants (3.5 GW) this month (albeit underutilised), and easing LNG prices will weigh on fuel oil and crude burn at the margin. As a result we do not expect the strength seen in March to last.

Japanese refinery runs dipped m/m by 0.12 mb/d to 3.60 mb/d in line with our estimates due to TARs at the Marifu refinery that reduced runs by 87 thousand b/d and the official closure of some 0.4 mb/d of CDU capacity. The impact from these closures was limited, however, as the units were already idled or running at very low utilisation rates. Q2 14 sees heavy planned works (~0.3 mb/d), peaking in May at 0.4 mb/d, reducing overall runs below 3 mb/d in May and June. Japanese crude imports fell m/m by 0.12 mb/d in March, and were lower by 0.34 mb/d, with Iranian imports lower at 0.14 mb/d. We expect imports to have eased further in April and throughout Q2 14 on high refinery TARs and rising pressure from the US to cut back purchases.

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