JAPAN DATA: Naphtha stocks plunge to near 3-yr low on slowing EU arrivals

Quantum Commodity Intelligence - Naphtha stocks in Japan hit levels not seen since October 2018 as the world's second-largest ethylene producer has been starved from European supplies amid tight supplies and high petrochemical demand there, weekly PAJ data showed.

Inventories of the hydrocarbon mixture in Japan plunged 12% during the final week of January to 7.7 million barrels, its second-lowest weekly level in over three years and below its Q4 average of 8.4 million barrels.

Current levels are nearly a quarter below the 2015-2019 average for this time of year of 10.2 million barrels.

Rising petchem demand and delays to maintenance to crackers in Europe have capped shipments and closed off the arbitrage, causing profit margins for Asian petrochemical crackers to fall far below theoretical breakeven costs for non-integrated producers.

The ethylene-naphtha spread was pegged below $150/mt last week and fell below the theoretical breakeven level of $350/mt at the end of December.

The weak petchem margins saw Japanese refiners cut their naphtha output to a one-month low of 212,300 bpd during the final week of January, at a time when they were ramping up again following their Omicron slump.

Crude oil throughput by Japanese refiners rose to just short of 2.8 million bpd after slowing down earlier in the month when Japan noted a sharp rise in new Covid infections.

Refiners boosted their gasoline output by 11% to 856,000 bpd following the Japanese government's introduction of a gasoline subsidy last week, which lifted inventories to 11.10 million barrels, 2% above its 2015-2019 average.

While the output of kerosene – a key heating fuel in Japan – was mostly stable on the week at 359,000 bpd, stocks rose nearly 4% to 11.21 million barrels to bring it back in line with its 2015-2019 average and implying a slowdown in demand.

It comes as temperatures across Japan have risen again in line with their 10-year average. However, temperatures in Kyoto are forecast to dip 1.1 degrees Celsius below historical averages by mid-February and -0.7 degrees below in Tokyo, NOAA data showed.

The cold snap at the end of 2021 caused Japan's liquefied natural gas inventories to slump to a seven-month low of just over 2 million mt by the middle of January, METI data showed, as power demand spiked and as shipments were diverted to Europe.

While LNG stocks tend to slip 2% between December and January seasonally, they are already down 14% so far this year but remain above the four-year average of 1.5 million mt.

For a full round-up of monthly and weekly Japan crude and refined product fundamentals data, visit Quantum's Data Dashboard.