Traders see limited VLSFO supplies in Japan in May

Very low-sulphur fuel oil (VLSFO) availability in Japan is likely to remain limited in May despite restarts at Japanese refiner Eneos' plants after a 16 March earthquake, domestic bunker fuel traders said.

Eneos' 145,000 b/d Sendai and 129,000 b/d Chiba refineries resumed operations on 25 April and on 24 April respectively. Japanese market participants have been waiting for the Sendai and Chiba plants to return to normal operations. Sendai especially is a key plant for VLSFO output as it produces VLSFO components and distributes them to Eneos' other refineries, traders said.

But the VLSFO supply outlook for May remains unclear because Eneos will enter its refinery turnaround season next month without having built sufficient stocks of the grade, domestic bunker traders told Argus.

Eneos was forced to shut operations at the Sendai and Chiba plants after the March earthquake.The shutdowns lasting over a month pressured the company's VLSFO inventories, resulting in limited deliveries.

Some trading houses were forced to decline bunker fuel supply requests after the earthquake, even from Japanese shipping firms with term contracts.

Domestic trading houses estimate that marine fuel supplies, including VLSFO and high-sulphur fuel oil, from Eneos make up 55-60pc of Japan's total sales. Eneos is Japan's largest refiner, with 1.87mn b/d of refining capacity across 10 refineries.

Traders expect supplies from fellow refiners Idemitsu and Cosmo Oil to also be unstable in May because of technical issues at their plants, as well as scheduled maintenance.

By Maiko Nakashima