In March, commercial oil stocks in Japan reversed the downward trend observed over past five months and increased by 6.6 mb to 164.4 mb. With this build, they switched the deficit incurred last month with a year ago to stand in line with a year ago at the same time. However, they remained 5.2 mb, or 3.1%, below the five-year average. The total stock-build was concentrated on crude, which increased by 8.5 mb, while product stocks countered this build, declining by 1.9 mb. Japanese commercial crude oil stocks reversed the declines incurred over the last four months and rose by 8.5 mb, ending March above 100 mb for the first time since October. With this build, they widened the surplus with a year ago to 1.5 mb from 0.3 mb a month earlier.
This build came mainly from higher imports, which increased by almost 360,000 b/d, or 9.3%, from the previous month to average 4.2 mb/d. This level represented an increase of around 430,000 b/d, or 11.3%, from the same period the previous month. It is worth noting that crude imports for direct burning in power plants continued to surge in the aftermath of last year's Fukushima nuclear crisis, increasing by 124.3% year-on-year to hit nearly 281,000 b/d. However, March’s figures saw a drop of 22.6% from February's level of about 363,000 b/d. Japanese demand for crude declined as the country emerged from the winter season. The build in crude oil stocks came despite higher crude throughput, which increased by about 30,000 tb/d, or 0.8%, to average 3.7 mb/d. This level corresponded to a refinery utilization rate of 81.8%, which was 0.7 percentage points (pp) lower than in the previous month, but 7.0 pp — much higher — than the same period last year.
In contrast with the increase in crude oil stocks, Japan’s total product inventories fell for the second consecutive month, by 2.0 mb to end March at 63.5 mb. At this level, they were 1.5 mb, or 2.3%, below the same time last year, while the deficit with the latest five-year average remained at 6.9 mb, or 9.8%. This stock-draw for total products came on the back of weaker product imports, which declined by about 200,000 b/d, or 27%, combined with stronger exports, which increased by 60,000 b/d, or 16%, from the previous month. The stock-draw in Japanese products came despite lower refined oil product sales, which declined by almost 350,000 b/d to 8.5% from a month earlier to average 3.7 mb/d. However, this level was 8.3% above the same period a year ago and represented a fourth straight month of gains, due partly to weak demand last year in the wake of the country’s triple catastrophe.
Within products, and with the exception of gasoline, all products saw a drop, with naphtha declining the most. Gasoline stocks rose by 1.4 mb to end March at 14.3 mb, the highest level for almost a year and representing a surplus of 1.6 mb, or 12.5%, over a year ago, but they remained in line with the latest five-year average. The build in gasoline stocks came mainly from higher gasoline production, which increased by 12.8%, combined with a substantial increase in gasoline imports, gaining 66% from the previous month. Higher gasoline domestic sales, which rose by 7.4%, limited the gains in gasoline inventories. Distillate stocks went down for the fourth consecutive month, by 0.7 mb, ending March at 25.3 mb, the lowest level since April 2010. Despite this decline, inventories were 0.2 mb, or 1.0%, above the same time last year, but remained 1.7 mb, or 6.4%, lower than the seasonal norm. Regarding the components of distillates, the picture was mixed: jet fuel oil rose by 3.0%, while kerosene and gasoil fell by 0.1% and 7.1% respectively. Higher jet fuel production was the main reason behind the build in jet fuel oil stocks, as the increase in inland consumption limited gains.
The slight drop in kerosene stocks could be attributed to the lower output combined with weak imports, while higher gasoil domestic sales and stronger exports led to the fall in gasoil inventories. Residual fuel oil stocks fell for the second consecutive month, by 0.4 mb, to finish the month at 15.5 mb. At this level, they were 0.1 mb, or 0.7%, above the same period a year ago. However, they remained 1.6 mb, or 9.3%, below the five-year average. Within the components of fuel oil, fuel oil A saw a build of 6.6% and fuel oil B.C stocks displayed a drop of 6.8%. The build in fuel oil A could be attributed to lower domestic sales, decreasing by 12.2%. Higher domestic sales were the main reason behind the drop in fuel oil B.C inventories. Indeed, the inland consumption of fuel oil has almost doubled from the previous year and Japan’s utilities are expected to use more fuel oil than a year ago to make up for the lost supply from nuclear plants, while the outlook for any restart of the reactors remains uncertain. Naphtha saw the bulk of the decline and dropped by 2.2 mb, to end March at 8.4 mb. At this level, stocks were 3.4 mb, or 28.9%, lower than the same period a year ago and 3.6 mb, or almost 30%, below the seasonal average. Lower imports, combined with higher domestic sales, were the main driver behind the fall in naphtha stocks in March.