Japan's ENEOS seeks to boost April-June fuel oil prices by 34%-37%

Japan's largest refiner ENEOS is seeking to raise its April-June fuel oil prices for domestic industrial customers by about 34%-37% from the previous quarter, mainly due to higher oil prices and a weaker yen against the dollar, according to documents seen by S&P Global Commodity Insights.

ENEOS is looking to raise the April-June low sulfur fuel oil price by 33.7% to Yen 104,100/kiloliter ($135.67/b), from the January-March quarter, according to the documents.

The refiner also seeks to raise the April-June higher sulfur fuel oil price by 36.9% to Yen 93,210/kiloliter, from the previous quarter.

It has tentatively set a dollar-yen exchange rate of 121.99 for April-June, compared with 114.70 for January-March.

The company typically sets final quarterly fuel oil prices on a retroactive basis after negotiations with term buyers. HSFO sold by the refiner has a maximum sulfur content of 3%, while its LSFO has a maximum sulfur content of 0.3%. The prices are on a delivered basis to Tokyo Bay, and payment is due 60 days after delivery.

Power demand

ENEOS' significant boost in its initial April-June fuel oil sales price comes as it expects April-September fuel oil demand for power generation doubling year on year amid high LNG prices, ENEOS Holdings Chairman Tsutomu Sugimori said April 20.

Amid LNG prices at "extremely high" levels, ENEOS is seeing a significant increase in its fuel oil demand in the first half of fiscal year 2022-23 (April-March) as an alternative fuel for power generation, Sugimori told a press conference as the president of the Petroleum Association of Japan.

"We are in the midst of assessing our capability to respond to this demand in the first half," said Sugimori, adding that ENEOS would not be able to meet the fuel oil demand fully, even after a 60% year-on-year increase in its fuel oil supply for power in the second half of FY 2021-22 (October 2021-March 2022).

"We will consider how best we can meet this [demand]," he said.

Some Japanese power utilities that can use fuel oil for power generation see fuel oil as among the alternatives in the face of high LNG prices since winter 2020-21, despite limited capabilities for fuel switching, according to market sources.

Japan's fuel oil sales averaged 114,227 b/d over April-September 2021, up 23% from a year ago, Ministry of Economy, Trade and Industry data showed, as local power utilities boosted their fuel oil procurements to make up for depleted stocks and to stockpile for winter amid high LNG prices.