Japanese oil demand remained strong in October, totalling 3.97 mb/d, although the y/y growth slowed to just 3 thousand b/d, in line with our view, as the favourable base effect from Fukushima has run its course by now. This was also evident in the data from Japan's 10 power utilities, which showed that consumption of crude oil was higher y/y by just 0.7%, although fuel oil use was still up a strong 25.8%. The levels of crude and fuel oil burn remained high, at 0.25 mb/d and 0.45 mb/d, but the y/y growth eased to 0.017 mb/d and 0.047 mb/d respectively, compared to the year-to-date averages of 0.14 mb/d and 0.17 mb/d. Although we do not expect a significant tranche of nuclear capacity to return online given the widespread public opposition, a higher base and greater usage of LNG next year (given the start-up of new regasification terminals) is likely to weigh on Japanese growth rates, despite overall demand still staying fairly elevated. In the short term, with forecasts pointing to a milder than usual winter, oil usage in power generation is likely to be lower than last year, with oil demand growth potentially dipping to negative territory. Already, despite the seasonal pick up in kerosene demand, it was lower y/y by 0.025 mb/d in October.
Crude oil imports fell to 3.280 mb/d, lower y/y by 0.121 mb/d driven by a reduction in imports from Saudi, UAE and Qatar. Imports from Iran were also lower m/m, by 0.03 mb/d, as refinery runs fell further to 3.1 mb/d, the lowest in four months, on seasonal refinery maintenance. Crude inventories declined by 1.5 mb over the month, while product inventories increased by 3.9 mb, with total crude and product inventories now above the five-year average by 1.4 mb