Increased fuel oil, crude supply for power following emergency request
Rare imports of direct-burning crude oil from Southeast Asia
Kerosene imports surge 62%; fuel oil imports triple on year
Tokyo — The severe cold spells in Japan boosted domestic heating oil consumption and kerosene imports in January, while the country ramped up oil procurement for thermal power generation, driving up fuel oil and direct-burning crude purchases in the month.
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Register NowJapan's oil demand for power generation shot up as the country faced a significant increase in its thermal power generation in early January because of severe cold spells, which had tightened the country's power supply and demand balance, because of a sharp drop in LNG stocks and low solar power output from bad weather.
Japan's power demand rose 7.6% year on year to 86,427 GWh in January, after having risen 8% year on year in the second half of December to 43,189 GWh amid cold spells in the country, according to the Ministry of Economy, Trade and Industry.
Japan's kerosene sales climbed 24.2% year on year to 533,570 b/d in January, with its sales of A-fuel oil -- a blend of gasoil and fuel oil in a 90:10 ratio, which is also used for heating at industrial plants and facilities -- rising 17.6% from a year ago to 217,468 b/d in January, according to preliminary data released Feb. 26 by METI.
Fuel oil sales surged 43.1% on the year to 179,585 b/d in January, when local refiners supplied 751,109 barrels of crude oil for power generation in the month, nearly double from 429,323 barrels in December, while there were no crude shipments for power in January 2020, according to METI data.
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View full agendaEmergency supply
The increase in fuel oil sales and crude shipments for power generation in January came to light following a rare emergency fuel supply request from the Federation of Electric Power Companies of Japan to the Petroleum Association of Japan on Jan. 7 in the wake of a surge in power demand following severe cold spells.
Japanese power utilities typically use low sulfur fuel oil, high sulfur fuel oil and low sulfur direct burning crude oil for power generation.
In a rare move, Japan received relatively inexpensive Southeast Asian medium and heavy sweet grades for direct-burning purposes for the utility sector. Japan imported around 261,970 kiloliters of Indonesian Sumatra Light, or Minas crude for January arrival, while the country also received 295,712 barrels of Vietnamese Ruby crude for the first time in many months.
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.
Japan's refiners have been struggling to produce enough burning fuels for the country's power utilities, and this could potentially lead to a temporary spike in its heavy sweet direct-burning crude imports between January and early March, according to a fuel oil and crude oil trading source at a Japanese integrated trading company with close knowledge of the matter.
Since mid-December 2020, there has been a sharp increase in spot heavy sweet crude purchase inquiries from Japanese utilities around Indonesia and Vietnam in the past few days, the trading source said.
Reduced crude
Japan's total crude imports, however, dropped 12.5% year on year and slid 1.2% month on month to 2.58 million b/d in January after having risen to the highest level in nine months in December.
January crude imports were the lowest for the month since January 1968, according to METI data.
Japan's crude throughput slid 1.5% month on month in January to 2.73 million b/d as gasoline demand fell 7.2% year on year to 703,075 b/d, the lowest level for the month in 30 years, because of the country's state of emergency restriction measures.
Japan in January declared a month-long state of emergency restrictive measures until Feb. 7, which was later extended to March 7 in a bid to curb the spread of COVID-19. This has been disruptive to the country's ailing gasoline demand but helped support kerosene demand for heating as consumers stayed home amid the cold weather.
The country's kerosene imports rose 62.1% year on year and 24.4% month on month to 125,563 b/d in January, with fuel oil imports nearly rising threefold on the year and fivefold on the month to 25,763 b/d, up from 9,027 b/d a year ago and 5,295 b/d a month ago.
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Severe cold spells bolster Japan's heating oil, power fuel demand in Jan - S&P Global
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