TOCOM sees no kerosene, gasoline futures contracts traded in March

No kerosene or gasoline futures contracts traded on the Tokyo Commodity Exchange in March for the first time, according to the latest TOCOM data and a company official on April 7.

"It's likely that the combination of several unusual factors -- such as the resumption of gasoline subsidies, refiners' reduced supply and a decrease in gasoline imports -- led to zero transactions in March," an official of TOCOM said April 7.

"We'll keep a close eye on trends starting from April onward," the official said.

TOCOM launched the kerosene and gasoline futures on July 5, 1999.

Futures market liquidity has been capped by the country's fuel subsidy program, which stabilized product prices regardless of crude oil price movements.

In response to the rise in crude prices driven by the war in the Middle East, Japan's government reinstated gasoline subsidies on March 19 to maintain the retail price of regular gasoline at Yen 170/liter ($1.07/liter), after ending them on Dec. 30, 2025.

In comparison, the international market moved up sharply due to the supply crunch caused by shipping disruption on the Strait of Hormuz, and the Platts-assessed front-month FOB Singapore 92 RON gasoline swaps crack spread against Brent swaps averaged $20.06/b in March, rising from $7.85/b in February, Platts data showed.

A fixed subsidy of Yen 5/liter was provided for kerosene and fuel oil, and it was scheduled to end on March 31. However, the government has been providing the same subsidy as for gasoline since March 19. Japan has since raised its fuel subsidy for gasoline, kerosene and fuel oil to Yen 49.8/liter (31 cents/liter) for the week of April 2-8, up from Yen 48.1/liter the previous week to curb the rise in retail prices of oil products, the government said April 1.

"With the reinstatement of gasoline subsidies and the further deterioration of import profitability, there were no longer any buyers or sellers for the waterborne-delivered gasoline futures," a Tokyo-based trader said, adding that "liquidity in the futures market is unlikely to recover anytime soon."

Several traders said the drop in waterborne-delivered kerosene trades was largely due to lower demand driven by rising temperatures.

Meanwhile the wider jet fuel/kerosene complex saw record figures due to supply tightness: the Platts-assessed FOB Singapore jet fuel/kerosene swap crack spread against front month Dubai swaps -- a measure of the product's relative strength to the crude it was refined from -- averaged at $66.72/b in February compared to an average of $19.97/b in January, and was last at $70.62/b at the Asia market close April 6.

Japan's airline operators have been affected by the rise in jet fuel prices, and were mulling higher fuel surcharges.

Yasushi Kaneko, Minister of Land, Infrastructure, Transport and Tourism, said on April 3 that Japanese airline operators will substantially increase their fuel surcharge for international flights due to a steep rise in jet fuel prices since March amid supply disruptions coming from the war in the Middle East, according to the Ministry's website.

Chukyo gasoline and kerosene futures contracts are for delivery to storage units with overland shipment facilities located in Aichi Prefecture.

"Chukyo traders withdrew from TOCOM in March, as they had few cargoes available for sale on TOCOM amid supply disruption," a trader in Chukyo said April 6.

An unplanned shutdown may squeeze supply further as ENEOS, Japan's largest refiner, shut the sole 145,000 barrels/day crude distillation unit at its Sendai refinery in northeast Japan March 31 due to unplanned maintenance, a company spokesperson said April 6, without specifying an expected restart date.

The refiner is expected to restart the sole 128,000 b/d CDU at its Marifu refinery in western Japan in early April after scheduled maintenance, Platts reported earlier.

Traded futures on TOCOM

Source: Tokyo Commodity Exchange