Japan to urge oil exporters to boost production

Japan is to request oil exporters to increase their output to help ease soaring global oil prices, with the current spike in prices hurting the country's economic activity.

Japanese premier Fumio Kishida said on 18 October, after an emergency meeting of relevant cabinet members to discuss ways to tackle rising oil prices, that it is important to first convince major oil-producing countries to boost production in co-operation with the IEA and then take appropriate actions for any affected industries. Kishida also instructed ministers to carefully watch movements in the oil market and its impact on domestic industries and households.

Oil prices have increased on expectations of tightening supplies and firming demand for the rest of this year, as Opec+ producers continue to champion a slow and steady approach to production rather than raising output faster to help temper rising oil prices. November Nymex light sweet crude futures rose to $82.44/bl on 18 October, the highest settlement for a front-month contract since October 2014.

The rising prices have already resulted in higher retail gasoline prices in Japan, which will hamper its economic recovery from the impact of Covid-19 pandemic after the government fully lifted a state of emergency on 30 September. Retail gasoline prices averaged ¥162.10/l ($226/bl) on 11 October, the highest level since 20 October 2014, according to trade and industry ministry data. Retail kerosine prices averaged ¥101/l, also the highest level in seven years, in a further blow for consumers ahead of the winter peak heating demand season.

Rising oil prices will also gradually affect the country's power prices, given imports of key generation fuel LNG in term supply contracts are largely linked to oil prices with a lag of several months. Oil-linked LNG deliveries to Japan last traded at $11.58/mn Btu for February 2022, higher by 9pc from $10.61/mn Btu for October, according to Argus assessments.

By Motoko Hasegawa