Japan flips to colder-than-usual weather outlook, boosting power, heating demand

All regions in Japan are forecast to experience temperatures below the 30-year average over the next month from Dec. 7, the Japan Meteorological Agency said Dec. 5, boosting demand for power generation and heating.

The latest month-long weather forecast follows a Nov. 28 weather outlook forecasting 30-year-average temperatures over Nov. 30-Dec. 29.

Japan is entering its peak power and heating demand season with local power and gas utilities generally well prepared and not actively buying spot winter cargoes, market sources said.

Despite a drop in temperatures since late November, LNG consumption is in line with original plans, according to the sources.

Tohoku Electric bought one spot cargo for Jan. 20-28 delivery in late November, but that was previously planned and not because of the colder weather, trade sources said.

Platts, part of S&P Global Commodity Insights, assessed the January JKM at $14.983/MMBtu Dec. 5, down 4.7 cents/MMBtu on the day and marking a third consecutive daily decline for the LNG benchmark.

Market sources said spot LNG demand from Northeast Asian countries remained weak as utilities in the region had already procured necessary volumes. On the supply side, there were no major LNG production issues with steady supply, the sources added.

In Japan, Chugoku Electric plans to restart the 820-MW Shimane-2 nuclear reactor Dec. 7, resume power generation in late December and bring it to commercial operation in early January.

Kerosene demand

Japanese oil traders, meanwhile, expect to see an uptick in kerosene demand for heating.

"Mild temperatures have put downward pressure on kerosene demand... but cold weather could prompt consumers' appetite for heating oil," said a Hanshin-based trader.

"Kerosene demand hasn't yet increased, though just a little further decrease in temperatures will help lift retail demand," said a Chukyo-based trader.

Japan Meteorological Agency data shows that average daily temperatures in seven major Japanese cities -- Sapporo, Sendai, Tokyo, Nagoya, Osaka, Hiroshima and Fukuoka -- in November edged up 0.1 degrees Celsius year-on-year, though the average daily minimum temperature lifted 1.0 C to 3.9 C.

According to Petroleum Association of Japan data compiled by Commodity Insights, weekly average kerosene shipments to the domestic market were 18.2% lower year-on-year to 219,316 kl or 1.38 million barrels in the four weeks to Nov. 30.

During a Sept. 19 press conference in Tokyo, PAJ President Shunichi Kito spoke of the need to import kerosene or jet fuel, which have similar specifications, ahead of the winter demand season.

"With the approach of the kerosene demand season, we will be in an import position for kerosene, as current [domestic production] is insufficient, particularly in northern Japan during winter," said Kito, who is also president and CEO of Idemitsu Kosan.

"We will consider and decide our response from options such as boosting imports of kerosene or importing jet fuel," Kito said.