Lifting of COVID-19 state of emergency to support Japan's Oct gasoline demand

Japan's Sept. 28 decision to lift all of the COVID-19 state of emergency and priority measures at the end of the month would support the country's ailing gasoline demand in October but market sources remained cautious about the speed of recovery.

Japan decided to lift all of its state of emergency on 19 prefectures and its priority measures on eight prefectures on Sept. 30 following a significant drop in new infections. This will be the first time that Japan will not be under any of COVID-19 state of emergency and priority measures since early April.

"The lifting of state of emergency measures in Japan would be supportive for gasoline demand, especially as daily COVID-19 cases continue to ease," said JY Lim, oil markets adviser at S&P Global Platts Analytics.

"Japan's crude runs are expected to rise to 2.7 million b/d between November and January, up from 2.3 million b/d in October, as refiners gear up for winter heating demand, and this will be supportive for crude imports over the next few months," Lim said.

A source with a Japanese refiner said: "After October, we could see [crude oil] demand increase for transportation use with state of emergency lifted."

Mixed views

Japanese refiners and traders surveyed by S&P Global Platts said Sept. 28 that the companies expect their October gasoline demand will recover from September but some remain cautious about whether the demand will mark a year-on-year increase in the next month.

One Japanese refiner said its October gasoline demand is expected to be flat from a year ago when the country had less impact from the coronavirus pandemic.

Another Japanese refiner was less optimistic about gasoline demand recovery in October when it does not expect its gasoline demand to reach the 2020 level as yet amid rising gasoline prices following the strength in crude oil prices.

Japan's domestic gasoline spot prices have been on an uptrend since Sept. 10 in response to the stronger crude oil market.

Gasoline rack price in Chiba was assessed at Yen 69,000/kiloliter ($98.7/b) Sept. 28, up Yen 2,300/kiloliter from Sept. 10, Platts data showed. The average price from Sept. 1 to 28 was Yen 67,117/kiloliter, Yen 1,315/kiloliter higher than the average of the previous month, and up Yen 23,242/kiloliter compared to September 2020, according to Platts data.

Petroleum Association of Japan President Tsutomu Sugimori said Sept. 15 that Japan's gasoline demand in September is estimated to be 5% lower year on year and down 12% from the pre-pandemic level in the same month in 2019.

The two Japanese refiners, however, said Sept. 28 they estimated the domestic gasoline demand in September to be falling between 6% and 10% year on year as a result of the impact of the coronavirus pandemic and the state of emergency measures.