January 31, 2007 at 8:44 am #4060
TOKYO, Jan 23 (Reuters), 2007 – Oil refiners in Japan plan to take 14 percent of capacity offline for second-quarter maintenance, leading to a potential drop in crude buying, but an increase in gasoline imports may be slower than 2006 when fires hit output.
A Reuters survey of refiners showed that the April-June shutdowns of crude distillation units (CDUs) will take down an average 682,000 barrels per day (bpd) off Japan’s 4.83 million-bpd capacity.
The shutdown programme is seen as large because various mandatory works coincided this year, taking scheduled maintenance 7 percent above second-quarter 2006, and it comes as Japan’s crude stocks are already 5 percent above last year’s levels.
“Refiners now hold sufficient crude inventories and they will be able to meet domestic fuel demand without increasing crude stocks,” said Masanori Maruo, an industry analyst at Deutsche Securities.
The bulk of the maintenance programme will take place in May, when an average 1.02 million bpd, or 21 percent, of the country’s total capacity will be offline. The level to be taken offline will ease to 655,000 bpd in June. (For table click [ID:nT9072])
“Crude demand will go down, but the impact on the spot market depends on OPEC and Official Selling Prices,” said a Singapore-based crude trader. Japanese buying of spot crude for April delivery has already tailed off, trade sources say.
Oil prices have slid more than 10 percent this month on weak demand amid mild northern hemisphere winter temperatures, despite OPEC output curbs. Some OPEC members have called for further action as they worry over usually seasonally weak second-quarter demand.
LESS GASOLINE IMPORTS SEEN
The deeper scheduled maintenance this year is likely to draw down product stocks levels in the world’s third-largest oil consumer, in a season when refiners usually increase gasoline imports ahead of peak summer demand.
However, imports may be lower than the same quarter last year when a series of unexpected outages increased shutdowns to 746,000 bpd — about 15 percent of Japan’s total — from scheduled maintenance of 636,000 bpd, after fires at TonenGeneral Sekiyu KK and Cosmo Oil Co. refineries.
Barring any unexpected outages this time, Japanese refiners could limit the need for costly gasoline imports.
“If you think simply, higher runs translate into higher domestic production, lower imports,” one trader said.
Last year, gasoline imports totalled 73,700 bpd in May, government data showed, higher than in May 2005 when gasoline inflows ran at 63,600 bpd due to lighter refinery maintenance.
Top-ranked refiner Nippon Oil Corp., which controls about a quarter of the country’s total capacity, and all other refinery groups, except for Fuji Oil , plan to conduct maintenance works this year.
Gasoline buying, which makes up a fifth of Japan’s fuel demand, is slowing as consumers buy more fuel-efficient vehicles.
From July to September, shutdowns in Japan are set to fall to an average 173,000 bpd, or 3.6 percent of overall capacity. For the October-December quarter, 114,000 bpd or 2.4 percent of capacity is to be shut at a time of winter heating fuel demand. (Additional reporting by Maryelle Demongeot in Singapore)
February 1, 2007 at 9:31 am #7470
Japan is shutting down 14% of its refinery capacity in 2Q07 and will decrease crude inventory and increase gasoline imports (not as much as required last year due fires at 2 of its major refineries). This combination of pushing more crude on the market and consuming more imports should improve refinery margins for the non-integrated oil companies like Valero. But Japan has excess capacity that is under utilized most of the time – it was once thought that perhaps a tolling arrangement might develop between China and Japan that could supply China or other Asian sector product demand while new world scale refineries were being built to replace small outdated ones.
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