The biggest jump in three years in the nation’s imports of oil for power generation is driving a rally in demand for Asian sweet crude.
Minas, Indonesia’s largest crude grade, traded Thursday at $6.12 a barrel more than Brent, the European benchmark grade, according to data compiled by Bloomberg. That compares with $1.89 on June 29 and an average $2.57 in the past 12 months.
Domestic power generators are burning more low-sulfur, or sweet, crude such as Minas and Vietnam’s Su Tu Den and Bach Ho to make up for a slump in nuclear output following the March 11 earthquake, tsunami and ensuing nuclear crisis.
Purchases of oil for power generation more than doubled in June to about 127,000 barrels a day, the Federation of Electric Power Companies said July 12. That may climb to 315,000 barrels a day in the third quarter, according to Osamu Fujisawa, a Tokyo-based independent energy economist.
“The suspension of the nuclear power plants will cause trouble for the utilities,” said Fujisawa, who worked in Japan for 30 years for Saudi Arabian Oil Co., the Middle East kingdom’s state oil producer. “From June to September we expect much more crude will need to be burned for electric power.”
Two-thirds of the country’s 54 reactors have been shut down after the twin disasters sparked three meltdowns at the Fukushima No. 1 nuclear power plant in the Tohoku region.
Reactors are operating at 36.8 percent of total capacity, according to the FEPC. That’s the lowest since May 1979. Units that were closed for maintenance have been prevented from starting by local officials concerned about safety amid the ongoing crisis.
Oil used in power generation surged 77 percent to 465,394 kiloliters last month, or about 97,000 barrels a day, the FEPC said. Thermal sources of electricity, including coal, natural gas and oil, increased 18 percent last month from a year earlier.
The 606,439 kiloliters that domestic utilities purchased last month was the most for any June since 2008, when the nation bought 764,204 kiloliters as the need for oil-fired generation jumped following the July 2007 closure of the Kashiwazaki-Kariwa plant, Tokyo Electric Power Co.’s largest nuclear station, after an earthquake that halted 8,212 megawatts of capacity.
Minas for immediate loading has climbed 13 percent since June 27, reaching $123.63 a barrel Thursday, according to Bloomberg data. Duri, another grade from Indonesia, increased 12 percent to $124.35 in the same period. Brent futures have gained 11 percent, settling at $117.51 Thursday.
“Minas is benefiting from the market perception that there is going to be extra demand,” said Roy Jordan, an analyst at FACTS Global Energy in London who worked for more than 30 years as an oil trader at Royal Dutch Shell PLC. “Depending on how the nuclear restarts go, we would expect to see something of an increase in the third quarter.”
The gains for Minas may be limited by Japan’s ability to turn to other fuels, Jordan said. The country’s liquefied natural gas usage climbed 31 percent in June to 4.03 million metric tons, according to the FEPC. LNG purchases jumped 30 percent last month.
“This time they seem to have put LNG as a priority,” Jordan said. “So effectively they are looking at crude and fuel oil right at the margin.”
Demand for electricity is surging during the nation’s summer months. The cooling degree day value for Tokyo, the largest metropolitan area, is expected to climb to 8.5 degrees by July 31 from 4.0 on Saturday, according to Bloomberg data. The normal level for the past five years is 8.5. The value is derived from subtracting a base of about 18 degrees from the daily average temperature and is designed to show energy demand.
Minas and Duri may also gain amid dwindling supplies from Asia and Africa of other so-called direct-burning crudes, oils that can be used in power plants without processing.
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