Japan looks to tighten gasoline market by lowering future refinery runs


TOKYO -- Most Japanese refiners will increase the amount of crude they will process in July versus June as many plants are coming back online after spring maintenance, oil refining industry officials said.

However, crude processing volume will remain slightly lower on-year, as oil demand in Japan falls amid a wide adoption of energy-efficient technology.

"We want to tighten the gasoline market by keeping runs a little lower than last year," said Akitsugu Takahashi, senior vice president of JX Nippon Oil & Energy Corp., Japan's largest oil refiner by capacity. "Gasoline margins (in the domestic market) have been very slim because of oversupply."

Stockpiles of gasoline have been steady on-year despite the slipping demand, while middle distillates' inventories have fallen by about 10% from a year earlier, data from the Petroleum Association of Japan showed.

Strong demand from reconstruction work in the areas hit by the tsunami and earthquake in March 2011 led to the fall middle distillates' inventories. Also, strong middle distillate margins at Singapore have encouraged exports, helping cut the inventory, Mr. Takahashi said.

JX, the oil refining unit of JX Holdings, plans to process 5.95 million kiloliters of crude oil in July for the domestic market, or 1.21 million bpd, down 1% from a year earlier.

Two other refiners have similar plans.

Idemitsu Kosan Co. will process 431,000 bpd of crude oil in the July-September quarter for the domestic market, down 2% from a year earlier.

Showa Shell Sekiyu KK  will process 462,860 bpd  in the July-September quarter for the domestic market, 2% lower on year. "We don't have much excess capacity. So, we won't raise runs sharply," a spokesman said.

Cosmo Oil Co.'s crude processing volume in July is expected to drop on-year, because the company will permanently close the 140,000 bpd Sakaide refinery in western Japan later this month in response to the country's falling oil demand. A Cosmo spokeswoman declined to talk about refinery operations.

Dow Jones Newswires

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