JAPAN DATA: July crude imports fall to lowest for the month in 54 years

Japan's crude imports fell 0.3% year on year to 2.08 million b/d in July, marking the lowest level for the month in 54 years, as local refiners maintained relatively low operation rates with the country's COVID-19 state of emergency and priority measures restricting population mobility and dampening transportation fuel sales.

The July shipments were the lowest for the month of July since 1967, though the monthly intake was up 7.5% from 1.94 million b/d in June, according to preliminary data released Aug. 31 by the Ministry of Economy, Trade and Industry.

Refinery feedstock requirements remained limited as close to 900,000 b/d of CDU capacity was shut during the first three weeks of July due to maintenance and unplanned outages, according to industry information collected by S&P Global Platts and Platts Analytics.

Japan's refineries are generally keeping their throughput and run rates at the lower end of their respective 5-year monthly average range, as consumer oil product demand, especially for transportation fuels, remains tepid due to the continued expansion and extension of the state of emergency, according to feedstock management and refinery operation sources at Fuji Oil and Idemitsu Kosan.

Japan's gasoline sales dipped 0.5% year on year to 814,562 b/d in July, the lowest for the month since 1990, at the start of the country's summer driving season, the METI data showed.

Japan's crude runs increased in August as refiners lifted middle distillate production for the peak summer gasoline demand season, while fuel distributors took more barrels during the Olympics held over July 23-Aug. 8.

However, with no spectators allowed for the Olympics in an effort to contain a resurgence of COVID-19, auto fuel sales may have slipped below initial market expectations, while consumer demand is expected to disappoint throughout the third quarter as the state of emergency has been extended, the refinery sources told Platts.

Japan added seven prefectures to the areas subjected to a state of emergency on Aug. 20, and added eight more prefectures on Aug. 27. With these measures, 21 prefectures, or 75% of Japan's population, have been under the state of emergency, which will be in place until Sept. 12. The country also added four prefectures to its less stringent priority measures for eight prefectures through Sept. 12.

UAE replaces Saudi as top supplier

The latest METI data showed that Japan had cut July shipments from Saudi Arabia by 20.9% year on year to 735,041 b/d, while Asia's third biggest crude buyer raised imports from the UAE by 15.1% year on year to 818,170 b/d.

The UAE replaced Saudi Arabia as the top supplier for July, the data showed.

Saudi Arabian crude grades are generally more expensive following the sharp uptrend in Saudi Aramco's official selling prices, refinery and trading sources across Northeast and Southeast Asia said.

Most recently, Saudi Aramco had set its OSP for Arab Light crude for loading in September and bound for Asia at a premium of $3/b to Dubai/Oman crude, compared with a premium of 30 cents/b for the grade loaded in January and a discount of 50 cents/b set for cargoes loaded in December 2020, Platts data showed.

Saudi grades will likely continue to command lofty premiums as the country's production and exports remain tight overall, the sources added.

OPEC and its allies will convene Sept. 1 in a volatile oil price environment amid pressure from the US to increase crude supply and concerns about the world's continued struggles with COVID-19 variants.

OPEC, Russia and nine other countries agreed in July to increase crude production by 400,000 b/d starting August through the end of 2022, but many Asian refiners and traders said the pace and scale of the supply hike is slower than desired, Platts reported earlier.

Meanwhile, Japan boosted Murban crude purchases from the UAE in July. Local refiners had doubled imports of the light sour Abu Dhabi grade from a year earlier to 463,417 b/d, reflecting Japanese oil companies' active participation in trading of ICE Futures Abu Dhabi, or IFAD, Murban crude futures which first launched March 29, industry and trading sources in Tokyo and Singapore said.

Early in the year, Abu Dhabi National Oil Co, the UAE's biggest energy producer, and ICE Futures Abu Dhabi had signed agreements with several Japanese end-users including Cosmo Oil to explore pricing their oil against the Murban futures contract

ADNOC and ICE partnered with BP, GS Caltex of South Korea, INPEX and ENEOS of Japan, PetroChina, PTT, Shell, Total and Vitol to launch IFAD.

JAPAN'S TOP 10 CRUDE SUPPLIERS

Source: Ministry of Economy, Trade and Industry