Gasoil exports from Japanese refiners may rise to a record this month after plants return from maintenance and boost processing amid increased demand for fuel as temperatures soar.
Exports are forecast to climb at least 15 percent from a year earlier, exceeding a previous high of 1.44 million kiloliters set in August 2008, according to a Bloomberg News survey of four refinery officials in Tokyo. Processors are making more gasoil as they ramp out gasoline output to meet summer demand.
“Strong gasoline sales amid hotter weather this month and last month boosted oil processing, and that resulted in an oversupply of gasoil,” said Osamu Fujisawa, a Tokyo-based oil economist at industry consultant FE Associations. “The refiners are forced to find gasoil homes outside of the country.”
The increase in gasoil cargoes from Japan may push down prices, which have fallen because of weak regional demand, and cut profits for Asian exporters including South Korea’s biggest oil refiner, SK Energy Co., two traders said. Gasoil refining margins, the spread between Singapore gasoil and Dubai crude oil, dropped to $11.77 a barrel on Aug. 17 from a 19-month high of $14.37 on Aug. 9, according to data compiled by Bloomberg.
Temperatures in Tokyo’s Otemachi financial district reached 37.2 degrees Celsius (99 degrees Fahrenheit) on Aug. 17, the highest in three years, according to the Japan Meteorological Agency. The hotter weather has prompted cars to burn more gasoline as drivers switch on air-conditioners.
When the temperature is at 35 degrees Celsius, air- conditioned cars consume 38 percent more gasoline than vehicles without air-conditioners switched on, according to statistics by the Japan Energy Conservation Center.
Gasoil Exports
Japan’s largest oil refiner JX Nippon Oil & Energy Corp., a unit of JX Holdings Inc., and Cosmo Oil Co.stepped up gasoil shipments to destinations including Australia, Chile and Singapore, to maximize refining profit, officials from the two companies said.
Gasoil demand in Japan has lagged behind gasoline amid a slow economic recovery. Gasoil sales fell 4.4 percent from a year earlier in the year ended March 31, while gasoline gained 0.1 percent, according to the trade ministry. Japan’s factory output shrank 1.1 percent in June from the previous month, government data showed.
Gasoline Margins
Refinery utilization rose to 81.4 percent in the week ended Aug. 14, the highest level since Feb. 27, according to data from the Petroleum Association of Japan. The rate dropped to this year’s low of 61.5 percent in the week ended June 19 as refiners shut plants for scheduled maintenance in the quarter ended June.
Even as refinery usage increases, gasoline inventories have fallen 18 percent to 1.92 million kiloliters from June 19, the association’s data showed. Stocks of low-sulfur fuel oil, mainly consumed by the nation’s largest utility Tokyo Electric Power Co., tumbled 18 percent in the same period.
Gasoline sales have improved refiner profit for processing the fuel, the officials said. The premium of gasoline futures over Middle East crude futures on the Tokyo Commodity Exchange averaged 12,699 yen a kiloliter in July, up 9.7 percent from a month earlier.
Japanese refiners are selling August-loading gasoil cargoes at parity to benchmark Singapore gasoil prices on free-on-board basis at ports in Japan, said a Tokyo-based gasoil trader who declined to be identified because of company policy.
The price of benchmark Singapore gasoil stood at $84.20 a barrel on Aug. 23, according to data compiled by Bloomberg. That compares with the current price of gasoil at 53,000 yen a kiloliter, or $99 a barrel, in Japan’s spot market.
Refiners can export the fuel because profits for gasoline and other products make up for losses on gasoil exports, a refinery official said.
“Active gasoil exports are not likely to last that long,” said Fujisawa, who formerly worked at Saudi Arabian Oil Co. and local refiner Showa Shell Sekiyu K. K.“Perky gasoline sales would probably stall in September. That is the time local refiners will start cutting down processing volume.”