Japan slashes kerosene shipments by more than 10% on warm winter: PAJ chief

Tokyo — The ongoing warmer than usual winter weather in Japan has slashed domestic kerosene shipments for heating purposes by more than 10% year on year, Petroleum Association of Japan's president Takashi Tsukioka said Monday.

"The current kerosene supply and demand shows that the shipment is below 90% [of the year ago level]," Tsukioka said at a press conference in Tokyo.

In the face of sluggish domestic kerosene demand, "refiners would adjust production [of kerosene], but the refiners are in a very difficult situation" because of their need to produce gasoil and low sulfur marine fuels compliant with the International Maritime Organization's global low sulfur marine fuels mandate that came into effect in January, Tsukioka said.

Japanese refiners slashed kerosene output by 23.7% week on week to 2.40 million barrels in the week January 5-11 on slow shipments of the heating oil, data released by the Petroleum Association of Japan showed January 16.

The drop in kerosene production, which was the only product showing a week-on-week decline in the January 5-11 product output data, came as a result of slow shipments after the build in stock a week ago. The kerosene stocks had jumped 9.8% week on week to 15.23 million barrels in the previous week to January 4.

The estimated kerosene shipments stood at 1.86 million kiloliters, or 11.71 million barrels in the four weeks to January 11, down 8.9% to 2.04 million kl from a year ago, according to S&P Global Platts calculations based on PAJ data.

Boosting exports

In the four weeks to January 11, Japanese refiners exported a total of 945,909 barrels of kerosene, up 86% from the previous four weeks, according to Platts calculations based on PAJ data.

As for kerosene exports, Tsukioka said it must have been "surplus kerosene" resulting from weak domestic demand, which had been supported by the "usual production for the winter."

The domestic demand for kerosene is low in Japan due to a less harsh winter during the 2019-2020 season, according to shipping and refining industry executives. As a result, more kerosene are being exported, they said.

Most of the volumes are being sold on a free-on-board basis to trading companies, which in turn export the cargoes, an executive with a refining company in Japan said.

Platts assessed the Kerosene Chiba Rack price at Yen 65,100/kl ($93.93/b) on Monday, down 3.1% from its high so far this year on January 8.

Local traders attributed the falling kerosene spot price in Tokyo Bay to weak demand because of the warm weather.

Rack oil products are those that are transported by refiners and other independent suppliers over land by truck, loaded from either refinery tanks or secondary tanks outside the refinery.