SINGAPORE: Japan's jet fuel imports in January are set to be the highest in more than two years as refiners produce more heating fuel kerosene to meet a surge in demand and cash in on the doubling of premiums in a year, trade sources said on Wednesday.
The higher demand is prompting refiners to boost kerosene yields and produce less of similar jet fuel, they said.
A colder than normal winter, low inventory and idled nuclear reactors are all boosting demand of the heating fuel in the world's third largest oil consumer.
Japan is likely to import 2 to 3 million barrels of jet fuel in January, up from December's 1 to 1.5 million barrels and November's 500,000 to 700,000 barrels, traders estimated.
It imported 50,129 kilolitres (about 315,000 barrels) of jet fuel in October, latest data from the Ministry of Trade, Economy and Industry show. Apart from October, in the past two years Japan only imported the product in February 2011.
Kerosene, jet fuel, diesel and gasoil are part of a cluster of oil products known as middle distillates.
HIGH PREMIUMS, LOW INVENTORY
Maximising of kerosene yield by Japanese refiners is in part profit-driven as prices of Japan-bound kerosene cargoes from South Korea have surged to more than $10 a barrel premium compared with $5 a barrel in the same period last year.
Jet fuel cargoes are trading at a premium of about 80 cents to $1 a barrel, a Singapore-based trader said.
"As much as refiners are able to convert, they rather import jet fuel instead of importing kerosene as jet is much cheaper," the trader added.
Traders expect premiums for kerosene cargoes to be even higher in February -- traditionally one of the coldest months.
Cosmo Oil is set to import the largest number, at four medium-ranged sized jet fuel cargoes for January, while JX Nippon Oil & Energy Corp will likely import about two cargoes, a Japan-based industry source said.
Idemitsu Kosan Co, Showa Shell Sekiyu KK and Mitsui & Co are likely importing a cargo each for January, the source added.
Lower inventory due to a backwardated structure, where prompt prices are higher than those in forward months, had also discouraged imports until now, traders said.
In the week ended Dec. 15, jet fuel stocks fell 8.29 percent from a week ago to 0.83 million kilolitres while kerosene stocks dipped to a near four-month low of 2.54 million kilolitres, data from the Petroleum Association of Japan (PAJ) showed.
"The domestic inventory for kerosene is about 25 percent lower than last year," a Singapore-based trader familiar with the Japanese market said.
"Adding to this, last year there were about 1.5 million barrels in storage in (South) Korea and North China. But this year it is below 0.5 million barrels."
**
Comments
Comments are closed for this article.