Japan oil demand may rise on nuclear uncertainty

Japan's crude and fuel oil demand this summer may increase more than expected due to uncertainty over the restart of nuclear reactors, even as reconstruction gathers pace,

the International Energy Agency said Wednesday.
Paris-based IEA said in its monthly report that oil consumption by utilities was only 50,000-100,000 barrels a day higher in June than a year earlier.
However, "it is possible that crude and fuel oil purchases may strengthen more than anticipated to meet peak demand," said IEA, citing "already warmer-than-normal June weather," among others.
Last week, Prime Minister Naoto Kan abruptly proposed conducting a new stress test on all nuclear plants in the country, adding to confusion and ambiguity over the restart of undamaged nuclear power plants, which has a significant impact on Japan's fossil fuel demand.
Many utilities have been unable to restart nuclear reactors that were undergoing regular maintenance during and after the Fukushima Daiichi crisis due to rising fears in the country over nuclear power.
Japan's nuclear power operating rate averaged 37% in June, falling below 40% for the first time in more than 30 years, the Federation of Electric Power Companies of Japan said Tuesday. Around two-thirds of Japan's 54 reactors are currently idle.
A significant rise in electricity demand will likely prompt Japanese refiners to import sweet crude and heavy fuel oil rather than hike refinery runs as they don't want to produce excessive gasoline, which is difficult to export except to South Korea due to specification differences.
Tsutomu Sugimori, Senior Vice President of JX Nippon Oil & Energy, Japan's largest refiner by capacity, said the company will "probably meet extra demand from utilities with imports."
Crude inventories held by refiners fell roughly 1 million kiloliters to 16.47 million kiloliters, or 104 million barrels, the Petroleum Association of Japan said earlier Wednesday.
Heavy fuel oil, which is used for power generation, accounted for much of the drawdown of stocks, which fell 12% from a week ago to 2.55 million kiloliters, PAJ data showed.
Source: Market Watch