Japan data: Refiners ramp up light crude imports in Nov for kerosene output

Singapore — Japan's crude oil imports in November increased from October, with shipments from Qatar, Russia and Malaysia posting sharp gains as refiners favored middle distillate-rich crude grades in an effort to boost kerosene output amid colder-than-average temperatures nationwide.

November crude oil imports rose 1.9% month on month to 2.3 million b/d in November, latest data from the Ministry of Economy, Trade and Industry showed.

However, the total was down 21.7% year on year as overall refinery run rates remain lower than in 2019 amid tepid transportation fuel demand due to the pandemic.

Japan's crude oil imports from top supplier Saudi Arabia fell 10.2% year on year to 1 million b/d in November, but were up 4.3% month on month, and accounted for 43.7% of its total crude imports.

However, the most notable monthly increases in November were registered by light crude and condensate suppliers including Qatar, Russia and Malaysia.

Crude imports from its top condensate, or ultra-light crude, supplier Qatar jumped 49.4% on month to 239,396 b/d in November, while shipments from light sweet crude suppliers Russia and Malaysia rose 12.7% and 168% respectively over the same period.

A breakdown of the monthly import data showed that Japanese refiners took 1.42 million barrels of Qatar's Low Sulfur Condensate or LSC in November, an almost threefold increase from 494,083 barrels in October.

Far East Russian Sokol crude was also highly sought after in the month, with 1.72 million barrels of the light sweet crude arriving in Japan, more than doubling the 707,615 barrels imported in October.

Japan also took more Abu Dhabi Murban crude in November, importing 8.95 million barrels of the light sour grade, up 11.9% from October, the METI data showed.

"The staple Middle Eastern condensate and light sour grades are in favor ... Japan is also one of the very rare buyer of [Saudi Arabia's] Arab Super Light crude," said a source at a Japanese integrated trading firm with close knowledge of regional condensate and light crude trade flows.

"Light sweet grades from short-haul Southeast Asia and Far East Russia will serve local refiners well as they want higher middle distillate yields," he added.

KEROSENE DEMAND SURGE

Japan's robust appetite for lighter-end crude grades and condensate came as little surprise as local refineries stepped up efforts to maximize production yield of kerosene, according to industry and refinery feedstock trading sources with knowledge of the matter.

The country's kerosene demand for heating is set to pick up further as consumers stay home due to the latest wave of coronavirus infections, coupled with a forecast of colder-than-average winter temperatures nationwide.

The latest weather outlook released by the Japan Meteorological Agency Dec. 25 showed that Japan is forecast to experience below 30-year-average temperatures across the country over Dec. 19-Jan. 1.

Japan's domestic kerosene sales jumped 59.3% on month to 285,995 b/d in November, latest METI data showed.

The country's top refiner ENEOS estimates December kerosene sales to jump 83% from November and rise 7% on year to 2.49 million kiloliters, or 505,161 b/d.

ENEOS noted that although a growing number of households are switching to electricity for heating, kerosene was still widely used in Japan.

"Kerosene spot market was bearish due to oversupply [not long ago], but the surplus barrels are disappearing fast," a trader based in Osaka said.

Japan's top 10 crude suppliers in November:

(Unit: b/d)

Source: Ministry of Economy, Trade and Industry