Japanese oil demand picked up seasonally in November, totalling 4.238 mb/d, although the y/y growth was once again in single digits, at just 7 thousand b/d, in line with our view, as the favourable base effect from Fukushima has run its course by now. For the first time since December 2010, crude oil burn fell y/y, by 40 thousand b/d, while fuel oil demand growth slowed to just 7 thousand b/d, the slowest since May 11, despite Japan's 10 major power utilities consuming 7.1% more crude y/y in November, and 14.5% more fuel oil. Nonetheless, the levels of crude and fuel oil burn remained high, at 0.22 mb/d and 0.42 mb/d. Although nuclear capacity is likely to remain constricted, an already high base and greater usage of LNG next year (given the start-up of new regasification terminals) are likely to weigh on Japanese growth rates, despite overall demand staying fairly elevated. As a result, we expect Japanese oil demand to decline by 0.16 mb/d (3.2%) y/y in 2013. In the short term, with forecasts pointing to a milder than usual winter, crude and fuel oil usage in power generation could fall further, with our expectation for a 6% y/y decline in the winter.
Crude oil imports were broadly flat m/m at 3.285 mb/d, but lower y/y by 0.269 mb/d, driven by a reduction in imports from UAE, Qatar and Kuwait. Imports from Iran were also lower y/y, but were up m/m by 25 thousand b/d. Refinery runs picked up to 3.215 mb/d, as refineries returned from maintenance. The combination of higher runs and lower imports resulted in a dip m/m in crude inventories, by 3.7 mb, and product inventories, by 6.9 mb, with total crude and product inventories below the five-year average by 7.7 mb.