In October, commercial oil stocks in Japan reversed the build experienced the previous month and declined slightly by 0.6 mb to stand at 178.2 mb. At this level, Japanese commercial oil stocks still showed a surplus with a year ago of 12.6 mb or 7.6%, while the deficit with the five-year average widened to 5.3% from 2.6% a month earlier. This stock-draw was attributed to a fall in products as they declined by 1.7 mb, while crude oil stocks abated the drop, rising by 1.1 mb.
Japanese commercial crude oil stocks continued the build seen the previous month and rose by 1.1 mb to end the month at around 101.0 mb. With this build, Japanese crude commercial oil stocks stood at 12.0 mb or 13.5% above the previous year during the same month. However, they showed a deficit with the seasonal norm of 1.2 mb. The build in crude commercial oil stocks in October came from lower crude throughput, which declined by more than 200,000 b/d or 6.2% from the previous month to average 3.15 mb/d. This level was also below last year at the same period by almost a similar rate and corresponded to a refinery utilization rate of 69.9%, 2.7 pp lower than the previous month and 2.3 pp less than a year ago over the same period.
It is important to note that direct crude burning continued to increase, showing almost 30% growth from the previous month to meet the needs of power generation. The drop in Japanese crude oil imports has limited the build in crude oil stocks. In fact, crude oil imports fell by 200,000 b/d or 5.6% from a month ago to average 3.4 mb/d, but they remained 0.2% higher than in the same month last year, marking the second straight rise after the previous month’s 4.5% jump.
In contrast to the build in crude oil stocks, Japanese total product inventories fell in October, reversing the build of the last three consecutive months to stand at 77.2 mb. With this drop, the surplus with a year ago narrowed to 1.0% from 9.0% a month earlier, while the deficit with the five-year average widened to 10.1% from 7.9% a month earlier. The drop in product stocks came from higher total oil sales, which increased by 2.1% to average 3.2 mb/d. At this level, crude oil sales were also 0.3% above last year’s level at the same time.
The increase in oil sales reflects the improvement in industrial output which rose more than expected by 2.4% and suggests a recovery from a slump caused by the earthquake earlier in the year. The decline in refinery output, which dropped by 2.2% to average 3.02 mb/d, also contributed to the drop in product stocks. With the exception of naphtha, which increased by 0.6 mb, all products saw a drop with the bulk of the loss coming from fuel oil stocks, which decreased by 1.3 mb, followed by a decline of 0.6 mb in distillate stocks, while gasoline inventories fell slightly by 0.3 mb.
At 12.6 mb, gasoline stocks showed a deficit of 0.6 mb or 4.8% over the same period a year ago, while in the previous month they switched the surplus with the five-year average to a deficit of 0.6 mb or 4.5%. The fall in gasoline inventories came on the back of lower gasoline imports, which dropped by 27% from the previous month. Lower gasoline domestic sales have limited the decline of gasoline stocks. Indeed, gasoline sales fell by 3.1% from the previous month and by 1.5% from a year ago, marking the eighth straight month of y-o-y decline. Distillates saw a stock-draw, finishing the month at 37.1 mb to stand at 1.7 mb or 4.7%, higher than a year ago at the same time, while they still indicated a deficit of 4.3 mb or 10.4% with the five-year average. Within the components of distillates, the picture was mixed; gasoil saw a drop of 7.5%, while jet mfuel stocks and kerosene rose by 4.1% and 0.4%, respectively.
The drop in gasoil stocks came on the back of higher domestic sales which increased by 5%, combined with lower output, which declined by 5.9%. The build in jet fuel stocks could be attributed to higher production, which increased by 12%. However, higher domestic sales limited the build. Kerosene stocks also rose to almost a three-year high as refiners anticipated surging demand for winter heating fuel to face a possible shortage, due to the slump in nuclear energy output. Residual fuel stocks fell by 1.3 mb to stand at 16.2 mb, the lowest level in almost a year and showed a slight deficit of 0.8% with a year ago at the same time, while they widened the deficit with the five-year average to 12.4% from 9.1% a month earlier.
Within the components of fuel oil, fuel oil B.C inventories saw a drop of almost 10%, followed by fuel oil A stocks, which declined by 3.0%. The stock draw in fuel oil B.C came on the back of higher domestic sales, as supplies were partly used for power generation. Sales of fuel oil B.C rose by 3.4% from a month earlier, but were nearly 50% higher than a year ago at the same period. The drop in fuel oil A inventories came mainly on the back of healthy domestic sales, which rose by 22% over a month earlier. Naphtha stocks saw a build of 0.6 mb to finish the month at 11.4 mb, while still indicating a deficit of 2.8% with a year ago over the same period and 11.5% less than the seasonal average.