COVID-19 slashes Japan's March gasoline demand estimated at the lowest since 1990

Tokyo — The coronavirus pandemic and the government's call for the public to voluntarily restrain from leisure activity have slashed Japan's domestic gasoline demand in March to the lowest for the month since 1990.

Amid heightened calls to stay home, as part of measures to curb the spread of COVID-19, during the last weekend by governors of Tokyo and four adjacent prefectures, including Kanagawa and Chiba, local traders said they expect gasoline demand in the metropolitan area to fall in the coming weekends.

Japan's gasoline demand is estimated at 3.77 million kl, or 764,921 b/d, in March, down 8% from a year ago, the country's largest refiner JXTG Nippon Oil & Energy said Monday. JXTG attributed the drop in gasoline demand to a sharp decline in leisure activity as a result of the spread of the coronavirus, in addition to the prevailing downtrend in demand for the motor fuel in Japan.

The March gasoline demand would be the lowest since domestic sales of 3.69 million kl was recorded in 1990, according to the Ministry of Economy, Trade and Industry data.

Regionally bearish

The drop in Japan's gasoline demand is in line with the downtrend experienced by other countries globally as the appetite for gasoline plunges as soon as cities undergo lockdown in a bid to curb the spread of the coronavirus.

In Asia, India, Sri Lanka, Malaysia and Thailand are currently on nationwide lockdown, while Indonesia -- the region's largest buyer of gasoline -- was reported to be preparing to impose domestic travel restrictions this week.

Reflecting the falling demand, the FOB Singapore 92 RON gasoline crack spread against front-month ICE Brent crude futures averaged minus $5.12/b over March 23-27, down from minus $1.59/b assessed in the prior week, Platts data showed.

Also in line with the bearish supply-demand dynamic, regional refiners have been slashing run rates, with Indian Oil Corporation for example, deciding to cut crude throughput at its nine refineries by 25%-30%. Likewise, Taiwan's CPC has reduced runs at both its Dalin and Taoyuan refineries to around 70%.

"There is a chance that future exports from these refineries will come off if runs remain low and demand picks up," one Singapore-based source said.

Lower runs

In Japan, refiners are considering cutting operating rates further in April, despite the March run rate already falling to the typical low prior to the start of maintenance season, as global demand for refined products plummet amid the COVID-19 pandemic.

At least two Japanese refiners are looking at the potential need for run cuts in April amid a drop in domestic demand for key oil products such as gasoline and gasoil, coupled with the country's relatively light spring refinery maintenance season this year, according to sources with these refiners.

In tandem with lower crude runs, one Japanese refiner said Monday that the company expects to cut its gasoline exports in April. "Although we cannot say how much will be cut, the [gasoline] exports will decline," the source said.

"Looking at the [gasoline] crack as well as the supply and demand situation abroad, there is absolutely no way to think about increasing it," the source added.

In March, Japan's gasoil demand is also estimated to have fallen 2% year on year to 2.92 million kl as a result of slowing cargo movements amid bearish economic activity, according to JXTG Nippon Oil & Energy.

Japan's crude throughput fell a further 2.9% week on week to 2.82 million b/d over March 15-21, according to the latest Petroleum Association of Japan data. It was last lower 21 weeks ago at 2.81 million b/d over October 20-26 last year, during the autumn refinery turnaround season, on the back of reduced gasoline output.

In four weeks to March 21, Japan's gasoline exports also fell 2.6% over the same period to 2.33 million barrels, according to the PAJ data compiled by Platts.