Page 9 - AsianOil Week 44 2021

AsianOil EAST ASIA AsianOil

Brent benchmarks settled at $81.99 per barrel on While ships might have opted to secure bun-
November 3, while US West Texas Intermediate kering services at a cheaper port, Platts ship-
(WTI) closed at $80.86 per barrel. ping sources noted that high freight rates were
“We hope OPEC+ will decide to increase out- encouraging shipping companies to avoid bun-
put ... in response to a request from Japan,” Sug- kering detours. As such, this will only exacerbate
imori said, referring to Japanese Prime Minister demand for fuel oil.
Fumio Kishida’s comments last month that his Bunker traders noted that supply of both
government would call on global oil producers HSFO and low sulphur fuel oil (LSFO) had
to increase their output. started to tighten, with one noting that it had
With high LNG prices driving demand suspended spot sales.
among Japan’s power utilities for oil, the coun-
try’s refiners are reportedly prioritising this Short-term shift
demand over the bunker sector. Japan’s oil demand has witnessed structural
declines for many years and, while volatility on
Bunker buster the international gas market is boosting current
“For refiners, selling fuel oil to power companies demand, this is set to continue shrinking over
makes much more sense than selling it to [the] the long term.
bunker market as the prices for power compa- Japan’s refiners have been encouraged to
nies are much higher,” Platts quoted an unnamed consolidate and close inefficient refineries in the
bunker trader as saying. face of reduced domestic fuel demand and rising
This is apparently beginning to strain fuel regional competition for export market share.
oil supplies, with Platts’ sources noting that In the power sector, the government has its
local refineries were reluctant to increase their sights set on expanding the share of renewables
throughput. and nuclear in the power mix at the expanse of
The pricing agency said the higher mid- both LNG and oil.
dle distillate crack spreads were curbing the The government has pledged to source
downstream sector’s enthusiasm for bunker oil 36-38% of the country’s energy from renewables
production. Platts quoted one bunker trader as by 2030, up from 18% in 2020. While nuclear is
saying: “Refiners don’t want to increase fuel oil also to see a boost – from 6% of the power mix
production.” to 20-22% – LNG is expected to see its slice fall
This will make things tricky, with demand for from 37% to 20%.
bunker fuel from the shipping industry expected Tokyo’s determination to boost renewables
ramp up over the next few months. and nuclear energy’s presence makes environ-
“Ships arriving in Japan after mid-November mental and strategic sense, particularly in light of
load bunker fuel for two voyages,” Platts quoted recent commodity market volatility. While surg-
a shipping industry source as saying. The ships ing LNG prices may stoke oil demand over the
stock up on fuel ahead of the New Year holi- winter, bunker market tightness is likely to ease
day period, when bunkering operations are in the spring as temperatures rise and demand
suspended. from the bunker industry normalises.™

Week 44 04•November•2021 www. NEWSBASE .com P9