Japan's Golden Week gasoline demand seen above 2020 despite measures

Tokyo — Japan's gasoline demand will take a hit during the Golden Week national holidays over late April to early May due to the country's latest COVID-19 priority measures on populous and tourist popular prefectures, but the motor fuel consumption will likely remain above the level a year ago when the demand plunged to a multi-decade low.

Japan on April 12 introduced the priority measures on Tokyo until May 11 and Kyoto and Okinawa until May 5 after having already applied April 5 to Osaka, Hyogo and Miyagi prefectures until May 5 following a rise in new COVID-19 infection cases.

The latest measures came just weeks after Japan lifted the state of emergency measures to curb the spread of the coronavirus pandemic on March 21. Roughly 27% of Japan's total population is under the latest priority measures.

"Japan's mobility index has been trending upward since the lifting of the state of emergency, but people are expected to remain cautious in their traveling plans as daily cases of COVID-19 are rising again, with the introduction of quasi-emergency measures in some areas," JY Lim, oil markets adviser at S&P Global Platts Analytics, said. "This is not helped by the fact the rollout of vaccines has been progressing slowly."

Japan's gasoline demand is expected to slip for the second consecutive month in April, according to latest data from Platts Analytics. The country is forecast to consume around 766,000 b/d of the motor fuel this month, down from 772,000 b/d in March and 777,000 b/d in February, the data showed.

Gradual recovery

Japan's gasoline demand had taken a hit in January, when the country had imposed the last state of emergency measures after marking gradual recoveries in previous months. The demand rebounded in February month on month from January but thereafter turned to a downturn trend.

Japan's April-May 2020 state of emergency measures sent the May gasoline demand to the lowest for the month since 1985 and marking the lowest monthly sales volumes throughout last year. The May 2020 gasoline sales dropped 22.4% from a year ago to 628,693 b/d, down from 663,960 b/d in April, according to the Ministry of Economy, Trade and Industry data.

After hitting the bottom in May 2020, Japan's gasoline demand was gradually recovering to 866,914 b/d in December before dropping to 703,075 b/d in January.

The demand rebounded in February month on month from January but turned to a downturn trend month on month from March.

Local refiners see the latest primary measures will have certain negative impact on the domestic gasoline demand during the Golden Week national holidays, one of the country's peak driving seasons, but the demand will likely stay above from a year ago level unless the stronger state of emergency measures are imposed, company sources said April 12.

One Japanese refiner expects to see the domestic gasoline demand to rise 10% year on year in April, with the Golden Week demand to be just above a year ago level or about a 3-4% increase from the year ago level, a company source said.

Similarly another Japanese refiner sees the April gasoline demand to rise 10% from the year ago, with the Golden Week demand to be just about flat on the year, a company source said.

Exports supportive

Rather than cut back refinery run rates in response to poor domestic demand, Japanese refiners are likely to raise export levels in the near term, a move spurred by steadily improving gasoline export margins, market sources said.

"Unlike before, there is steady demand from Southeast Asia and Australia," one Singapore-based market source said. Agreeing, a second source noted that "[Asian] crack spreads have been on the rise. Refineries are turning toward exporting more gasoline."

Month-to-date as of April 9, the FOB Singapore 92 RON gasoline crack against front month ICE Brent crude future has averaged $7.04/b, up from the $5.69/b average in March, and $4.28/b in February, Platts data showed.

Reflecting the willingness to export, inflows of gasoline into Singapore from Japan have risen in March at 57,324 mt, up from the 9,644 mt in February, according to Enterprise Singapore data. This level could potential rise in April, with imports from Japan to Singapore month-to-date as of April 7 already totaling 37,383 mt, the data also showed.