OECD Pacific Oil Demand in September 2012

In Japan, the latest August monthly data was once more dominated by strong increases in crude and residual fuel oil direct use. The summer’s seasonally higher requirements led to an extra increase in fuel usage. Direct crude and residual fuel burning for electricity production is expected to further continue throughout 2012 and 2013, but with less volume.

Although the Japanese government earlier last month announced its decision to phase out nuclear power by 2040, intense opposition from business groups and communities, whose economies depend upon nuclear plants, forced the government to delay its decision. This could weaken the government’s initial phase-out plan. It might be some time before the government comes to a final decision, since it remains to be seen in which direction future Japanese energy policy will be heading in the medium and long terms. Nevertheless, the current usage of fossil fuel for electricity generation seems to be the only option for covering the country’s needs in the short term.

In South Korea, July data pointed towards a strong increase in oil use by 4.7% y-o-y; the biggest additions were observed in industrial products, naphtha for the petrochemical sector and residual fuel oil. OECD Pacific oil consumption is expected to grow by 0.36 mb/d y-o-y in 2012, and the bulk of the increase will result from direct crude/fuel oil burning for electricity generation and substituting nuclear plants. During 2013, OECD Pacific oil consumption is projected to grow again, but at a lower level of 0.06 mb/d.

Auto sales in Japan dropped for the first time for more than a year in September, by 8.1% y-o y, as the desire for fuel-efficient vehicles was hampered by the expiry of government subsidies late in the month. Moreover, the end of the subsidies brings Japanese car-makers back to the difficult state that existed before the government aid programme — maintaining domestic output as a strong yen weighs against increasing production for exports. Finally, Japan's auto industry also faces a gloomy outlook in China, as a result of anti-Japanese sentiment over a territorial dispute. It is expected that the decline in sales in the coming months will be limited to around 10%. South Korean domestic car sales contracted by a strong 7.1% y-o-y in August, due to weak domestic demand as a result of an economic slowdown. For the same month, exports fell by 2.8% y-o-y.