Japan planning massive export of oil

Japanese companies are planning to flood the international market with six million barrels of heating oil. The move could result in a crude oil price of $25 per barrel, say officials in Japan.

http://www.aftenposten.no/english/business/d166394.htm

-- Martin Thompson (mthom1927@aol.com), October 05, 2000

Answers

Interesting, if cryptic. Where are they going to get all that heating oil? Is it stockpiled in Japan and unneeded with winter coming on? Somewhere else? Is there a surplus of diesel fuel somewhere? And why did this show up in a Norwegian newspaper? Lots more questions. Need more info.

-- Cash (cash@andcarry.com), October 05, 2000.

Here is a bit more.

6 MILLION BARRELS BY YEAR'S END Oil companies agree to release reserves

The domestic oil industry is likely to release some 6 million barrels of gas oil onto the international market by the end of the year to help stabilize soaring oil prices caused by an international shortage, the Ministry of International Trade and Industry said Thursday. The government is asking the domestic oil industry to open its taps in response to a worldwide request by the Paris-based International Energy Agency, which is concerned there will not be enough heating oil for the coming winter.

Since gas oil is used as heating oil in North America and Europe, the ministry expects Japan's supplies of gas oil to have a positive impact.

Although the decision on exporting belongs to the oil companies, some top oil executives have responded positively to MITI's request, ministry officials said. Since many Japanese use kerosene heaters, gas oil exports are not expected to endanger the domestic supply of heating oil, the officials said.

They also said Japanese firms' gas oil stocks are 10 percent higher than the previous year because the output of other petroleum products was increased to meet strong demand for electricity during the sweltering summer.

Several petroleum products, including gasoline and gas oil, are produced simultaneously when crude oil is refined.

The Japan Times: Oct. 6, 2000

http://www.japantimes.co.jp/cgi-bin/getarticle.pl5?nb20001006a1.htm

-- Martin Thompson (mthom1927@aol.com), October 05, 2000.

Japanese industry to export heating oil stocks to US By Lindsay Whipp and Gillian Tett in Tokyo

Published: October 5 2000 14:17GMT | Last Updated: October 5 2000 15:23GMT

Japan's government on Thursday announced that its private sector oil companies would export part of their stockpiles of oil products to offset the recent sharp rise in global oil prices.

The move, which first emerged at a meeting of the International Energy Agency on Wednesday night, is designed to help counter the squeeze in the gasoil markets in the US, officials indicated. Gasoil is used for heating and fuelling diesel engines.

The government refused to indicate what volume of oil product exports would result from the move. However, some officials indicated that about 6m barrels of gasoil could be exported in the next two to three months.

Takeo Hiranuma, trade minister, told the Financial Times that the government hoped that Japan's exports would be "as large or a bit bigger" than the oil product volumes that the US government is releasing from its state reserves to combat rising oil prices.

Most of the sales are expected to go through Singapore's spot market.

"As the US is heading for the winter season, which is a demanding period ... we thought that it would be good for the stability of world prices if Japan exported some of its heating oil," he said.

Mr Hiranuma denied that he had decided to take this step under US pressure.

"This was our initiative," he said.

However, the planned exports could prove domestically controversial since oil has been a highly sensitive matter in Japan in recent decades.

The country imports 99.9 per cent of its oil, and has always been vulnerable to oil price movements. Indeed, the second oil crisis of the 1970's tipped the country into recession.

To reduce this vulnerability, the government has tried to maintain very high public and private stockpiles in recent decades. These normally amount to six months consumption of crude oil and oil products, but have been rising in recent months, according to Mr Hiranuma.

"This summer there was an increase in the production of heating oil and, as a result, Japanese private companies are holding high inventories," he said.

These reserves have helped to ensure that the recent further rise in global oil prices has not resulted in a rapid rise in consumer oil prices inside Japan - particularly since Japan's oil industry has recently been deregulated and consumer activity is muted.

Mr Hiranuma argued that these high reserves and low prices made it "logical" for Japanese companies to export their oil to countries where prices are higher.

However, some companies retain reservations. For while some are already raising their exports of oil products to take advantage of higher prices outside Japan, they would prefer to export selectively to take advantage of price movements, rather than flooding global markets with exports in an attempt to push down prices. In August, Japan exported around 1.7m barrels of gas oil, almost double the July rate.

Keiichiro Okabe, head of the Petroleum Association declared that Japan's oil companies would comply. He said: "We would like to take this chance to export and contribute to the rebalancing (of supply and demand) in this region."

However, a senior trader at Cosmo, one of Japan's large oil companies, which has recently started exporting to Asia, said on Thursday: "This statement (by Mr Hiranuma) is meaningless - we are exporting anyway."

Naomi Inoue, an official at Idemitsu Kosan, a company which is not currently exporting, said: "Although we would like to co-operate, economic conditions do not permit us to do so - we do not have enough supplies."

Mr Hiranuma denied that he would force companies to co-operate. However, he said that the Ministry would consider incentives to persuade them to comply.

"We will start by requesting, and then encourage them. I believe that if we try to persuade the companies they will respond."

http://news.ft.com/ft/gx.cgi/ftc? pagename=View&c=Article&cid=FT3BBW3IYDC&live=true&tagid=ZZZCWHK1B0C&su bheading=energy

-- Martin Thompson (mthom1927@aol.com), October 05, 2000.

Of course the U.S wouldn't pressure anybody. Has Secretary Richardson been in the Land of the Rising Sun lately?

-- Martin Thompson (mthom1927@aol.com), October 05, 2000.

Friday, October 6 7:51 PM SGT

Japan Oil Cos Respond To Govt Call To Up Gasoil Exports By Maki Aoto Of DOW JONES NEWSWIRES

TOKYO (Dow Jones)--In the wake of the Ministry of International Trade and Industry's request Thursday, Japanese oil companies are preparing to boost exports of gasoil to the international market for the October to December period, company officials said Friday.

Katsusada Hirose, MITI's vice minister for administrative affairs, said he hopes Japanese refiners will export a total of 6 million barrels of gasoil - which has similar specifications to heating oil in the U.S. - during the fourth quarter to help ease tight international supply.

Major oil companies said Friday they are considering gasoil exports positively within the range that will neither affect their crude processing plans nor hurt stable domestic supply of oil products.

However, industry experts say MITI's de facto urge to boost gasoil exports by 2 million bbls, or 320,000 kiloliters, each month from October to December is unlikely to be carried out.

Oil companies fear most a vicious spiral of abundant exports and its adverse impact on the domestic market, at a time when they restrain crude runs to keep domestic supply under extremely tight control.

Most major oil companies plan to cut their crude runs by 2% to 4% for the October to December period, in a desperate effort to shore up domestic product prices.

"It's possible that Japan exports that much of gasoil if they raise their (crude) runs," said an industry source. "But if everybody rushes to export now, oil product prices will be damped especially in the Asian market, which will trigger selloffs of crude oils. This is exactly what oil companies want to avoid."

A retreat in crude oil prices in the short term means that Japanese oil companies will miss the chance to retroactively and fully pass rising crude imports costs onto domestic retail oil product prices.

Due to fierce price-cutting battles among retail outlets, who are fighting for market share, Japanese retail product prices haven't kept pace with rising production costs.

Opinion Divided As To Actual Mkt Impact Of Japan Move

Opinion amongst Asian middle distillates traders was divided as to how Japan's gasoil export plan would impact the market if it came to fruition.

"If it happens, it will obviously have a depressing effect on gasoil and regrade (the spread between jet fuel and gasoil). Six million barrels would hit the market for a good couple of months, with negative effects felt into the first quarter of 2001," said a Singapore middle distillates trader with a European trading house.

"I think it's basically difficult (for Japan) to attain the target of 6 million barrels," said Yuji Morita, oil group manager at Japan's Institute of Energy Economics.

Morita said that ahead of the winter season, raising gasoil production for exports will likely hinder inventories for kerosene, which is used for heating in Japan.

Kerosene stocks recently hovered lower than average-year levels due to strong gasoline demand this summer for air-conditioning. According to MITI's latest available statistics, Japan's end-August kerosene stocks stood at 3.98 million kL while gasoil inventories at 2.25 million kL.

Last year, Japan exported a total 408,229 kL, or 2.57 million bbls, of gasoil in the fourth quarter, MITI said.

Keiichiro Okabe, chairman of the Petroleum Association of Japan, made it clear in his statement this week that the issue of supplying oil products to the international market is the matter that should be discussed by respective oil companies.

Cos Take Different Stance Toward Gasoil Exports

Indeed, each company takes a slightly different stance toward gasoil exports, with Nippon Mitsubishi Oil (J.NPO or 5001) and Cosmo Oil Co. (J.COO or 5007) most willing to export.

Nippon Mitsubishi, the largest Japanese oil company, said Friday it plans to export 50,000 kL of gasoil in October after supplying a 50,000 kL cargo each in August and September to the international market.

A senior company official said Nippon Mitsubishi will consider further exports in November and onward if the arrangements are expected to generate profits and the timing doesn't affect domestic supply.

Cosmo Oil said it will probably be able to export excess gasoil cargoes without altering its plan to keep crude runs for the October to December quarter around the same level from a year earlier.

But Idemitsu Kosan Co. (J.IKC), which exported a total of 100,000 kL of gasoil in September for the first time in recent years, has currently no plans for more exports.

"We will discuss the issue, considering the market price and domestic demand-supply balance. Right now, we are producing to meet domestic demand," a company spokesman said.

Japan Energy Corp. (J.NPM or 5014), which hasn't exported any gasoil this fiscal year, which runs from April to March, said it will cooperate with MITI's target although it has yet to decide on concrete plans for exports.

A company spokesman said the export environment for oil companies is becoming favorable, given higher prices in the international product market compared with the domestic spot market, as well as falling refining costs.

While MITI's Hirose stressed that the ministry doesn't intend to intervene in the market, some industry experts claim that it may be the government's "lip-service" to the outside world.

Asked how MITI calculated the expected 6 million bbls of gasoil exports, Hirose said the U.S.'s planned release of 30 million bbls of crude oil from the Strategic Petroleum Reserve will likely produce 3 million to 5 million bbls of heating oil.

"Compared to these figures, we are hoping to supply considerable volume (of gasoil)," he said. (Sri Jegarajah of Dow Jones Newswires contributed to this article)

http://asia.biz.yahoo.com/news/asian_markets/article.html? s=asiafinance/news/001006/asian_markets/dowjones/Japan_Oil_Cos_Respond _To_Govt_Call_To_Up_Gasoil_Exports.html

-- Martin Thompson (mthom1927@aol.com), October 06, 2000.