Japan’s oil products demand may have yet to recover

Japan posted an increase in oil products output in July for the first time in 14 months, but it may be premature to interpret this as a sign of demand recovery from Asia’s second-largest consumer.

Even though the uptick came alongside a jump in crude oil imports and a fall in products inventories, the country’s refiners may simply be preparing to rebuild their stockpiles after the plant maintenance season; more data will be needed in the coming months for demand growth indications.
On Friday, the Ministry of Economy, Trade and Industry said Japan’s products output rose a modest 0.9% on year in July to 18.02 million kiloliters, or about 113.3 million barrels.

Oil demand growth in Japan, Asia’s top importer, has stalled in recent years because of a slowing domestic economy.

The country has also diversified its energy mix: it’s the world’s leading importer of liquefied natural gas and relies on nuclear power generation widely.

Based on gasoline figures alone – July is the peak driving season in Japan – demand indications aren’t decisively positive.

Still, gasoline is only part of the demand picture, and Japan may import more crude and raise its fuel oil output to replace lost supply in the months ahead.

MarketWatch