Japan's Feb oil demand for power slows after surge in Jan on cold spells

Tokyo — Japan's oil demand for power generation retreated in February after having surged in January in the face of robust power demand from severe cold spells, as the country replenished its LNG stocks by mid-February.

The country's oil demand for power generation, which had shot up in January as the country faced a need to supplement gas-fired power generation following a sharp drop in LNG stocks, coupled with low solar power output from bad weather.

Japan's oil demand for power generation, however, slowed in February as the country imported less direct burning crude oil as well as selling less fuel oil for power generation as its power demand eased from January when it rose to a five-year high level in the first half of the month.

Japanese refiners slashed their crude shipments for power generation by 85% month on month to 112,613 barrels in February, while there were no crude shipments for power a year ago, according to preliminary data released March 31 by the Ministry of Economy, Trade and Industry.

Power fuels

Japan took a parcel of 228,986 barrels of Duri crude from Indonesia in February, compared with its intake of 261,970 barrels of Indonesian Sumatra Light, or Minas crude and 295,702 barrels of Vietnamese Ruby crude in January, according to METI data. It marked the first Duri crude imports since December 2018.

Japanese power utilities typically favor low sulfur Indonesian and Vietnamese crude grades such as Minas, Cinta, Duri, Su Tu Den and Ruby for power generation.

In February, Japan also imported 45,293 barrels of ultra low sulfur fuel oil from Thailand, which could also be used for power generation, nearly flat from 46,482 barrels in January, according to METI data.

Japan's fuel oil sales dropped 20.2% month on month and 4.3% year on year to 143,370 b/d in February, although the country hiked its fuel oil imports by 76.4% month on month to 45,454 b/d in the month. Fuel oil imports were up more than 31 times from 1,458 b/d in February 2020.

The country's February oil demand for power slowed as its LNG stocks held by power utilities rose to around 2.5 million mt as of Feb. 13, a level above a seasonal high of around 1.9 million mt around Dec. 9, as the country has passed its peak winter power demand period, according to METI data.

LNG stocks held by power utilities also dropped by around 40% over the course of a month from mid-December, which led to utilities restricting LNG thermal power generation amid difficulties in building LNG inventories in the face of strong demand in East Asia, coupled with shipping constraints in the Panama Canal, according to METI.

Kerosene demand

Despite a slowdown in oil demand for power generation, Japan's kerosene demand for heating remained relatively strong in February. Kerosene sales rose 1.2% year on year to 469,481 b/d in February, but they were down 12% from January.

Japan imported 115,981 b/d of kerosene in February, up 84.4% from a year ago but they slid 7.6% from the previous month.

While boosting its fuel oil and kerosene imports, Japan cut its crude processing volume by 12.7% year on year and 6.8% month on month to 2.54 million b/d in February, when the country faced sluggish gasoline demand in the midst of state of emergency measures.

Gasoline sales slid 8.2% year on year to 778,770 b/d in February, the lowest for the month since 1991, with jet fuel sales plummeting 57.1% year on year to 35,919 b/d in February, the lowest for the month since 1976.

The gasoline and jet fuel demand took a hit from Japan's state of emergency measures imposed in January, which had been extended a few times to March 21 with changes in regions in Tokyo and its three adjacent prefectures in the latest restrictions.

Japan's crude imports dropped 10.2% year on year but were nearly flat month on month at 2.58 million b/d in February, the lowest for the month since 1968, according to METI data.