Argus Media Limited

11/29/2021 | News release | Distributed by Public on 11/28/2021 22:30

Power demand limits Japan’s bunker fuel availability

Japan's marine fuel availability has been tight since early November as Japanese refiners prioritise fuel oil supply requests from the domestic power sector in preparation for peak winter electricity demand.

Japanese refiner Eneos has received 2½ times more fuel oil delivery enquiries from Japanese power firms compared with a year earlier, while the company's supply volumes have doubled, Petroleum Association of Japan chairman Tsutomu Sugimori said last week. Sugimori is also the chairman of Eneos.

Japanese power firms that operate oil-fired power generation plants started securing fuel oil earlier than the previous year and even lifted purchases of the feedstock, having learnt from severe power shortages in the country from December 2020 to January this year. Japanese power firms consumed around 28,000 bl of fuel or crude oil for power during October-December 2020.

Domestic oil refiners delivered marine fuel oil to trading houses in November within the allocated volume based on their term contracts. Most of the allocated volumes were supplied to Japanese shipowners as demand from coal and iron ore carriers has been strong.

Japan's October coal imports of 15.9mn t, which includes steam, coking, anthracite and met coal, rose by 8.2pc on the year and were higher by 2pc from the same month in 2019. The country purchased 9.9mn t of iron ore during the month, up by 10.4pc from a year earlier but lower by 2.9pc from October 2019, according to latest data from the country's finance ministry.

Technical issues at refineries and a lack of vessels that carry bunker fuel components also pressured marine fuel inventories. Some coastal vessels have been busy shipping fuel oil to power generation plants from refineries on a priority basis, market participants said.

Strong power sector requirements and bulk carrier demand meant there were no additional bunker fuel cargoes available during the month. This led to limited spot availability of both fuel oil cargoes and bunker barges, resulting in a rise in Tokyo bunker fuel prices with sparse discussions. This is likely to last at least until December, traders said.

Japan's very low-sulphur fuel oil prices have averaged $648.08/t so far in November, higher compared with $639.03/t in South Korea, $610.67/t in Zhoushan, China and $616.04/t in Singapore.

Tokyo high-sulphur fuel oil prices have averaged $535.22/t so far in November, higher compared with $513.29/t in South Korea, $506.76/t in Zhoushan and $456.50/t in Singapore.

By Maiko Nakashima