Crude falls on worries over Japan demand, economic growth

14 March 2011 06:24  [Source: ICIS news]

SINGAPORE (ICIS)--Crude futures fell sharply on Monday, with ICE Brent tumbling more than $2/bbl at one stage, amid concerns over the impact of 11 March’s devastating earthquake and tsunami on Japan’s oil demand and economic growth.

At 05:52 hours GMT, April Brent on London’s ICE futures was trading at $111.94/bbl, down by $1.90/bbl from the previous close, after earlier falling to a session low of $111.16/bbl.

April NYMEX light-sweet crude futures were trading at $99.66/bbl, down by $1.50/bbl from the previous close, after previously declining to an intra-day low of $99.18/bbl.

Demand from Japan, which is the world’s third largest consumer and importer of oil, was expected to be reduced in the near term due to damage and disruption caused by the massive earthquake.

Japan’s stock market slumped on Monday with the Nikkei Index down 6%.

The 9.0 magnitude earthquake and tsunami hit northeast Japan on Friday causing extensive damage and loss of life in Miyagi and Fukushima prefectures.

Four refineries were shut down in Japan in the immediate aftermath of the Friday’s tragedy.

JX Nippon Oil and Energy shut down the Sendai, Kashima and Negishi refineries while Cosmo Oil and Kyokuto Petroleum have both shut down their refineries in Chiba.

A fire was still burning at storage tanks and shipping facilities at JX Nippon Oil and Energy’s 145,000 bbl/day Sendai refinery located in the hard hit Miyagi prefecture, company spokesman said on Monday. The company may start to extinguish the fire on Monday.

Both the 189,000 bbl/day Kashima and the 270,000 bbl/day Negishi refineries remained shut down and it was unclear when they will restart, a JX Energy official added.

A fire in storage tanks at Cosmo Oil’s 220,000 bbl/day refinery in Chiba, which broke out following the earthquake was still burning on Monday and the refinery remained shut down, a company official said.

Japan’s oil demand in 2010 totalled some 4.42m bbl/day, around 5% of global demand, according to data from the International Energy Agency (IEA). With limited domestic oil production, Japan imports around 97% of its oil requirements.

Worries over unrest in the Middle East eased after the somewhat limited public response to the planned “Day of Rage” in Saudi Arabia and Bahrain last Friday.

Forces loyal to Libyan leader Muammar Gaddafi appeared to have gained ground against rebel forces overt the weekend capturing the key oil terminal port and refining centre of Ras Lanuf on Saturday and taking Brega, another oil terminal port, on Sunday.

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By: James Dennis
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