Cold spell in East Asia boosts kerosene demand for heating

SINGAPORE  - An unusual cold snap in East Asia is boosting demand for heating fuel kerosene, prompting refiners to maximise their output of the oil product, traders and refining sources said on Tuesday.

Dozens of people have died as the cold spell hit countries in Asia, recording the lowest temperatures in decades, disrupting flights and stranding tourists.

While Asia predominantly uses coal and natural gas for heating, demand for kerosene used in home heaters in Japan and South Korea is going up, pushing Asian jet-fuel margins higher, at least five Asia-based sources said. "There's a big impact in Korea. We would like to import kerosene but there is no spot supply available," a South Korean refining source said.

Flights at the airport on the South Korean holiday island of Jeju were halted on Sunday for a second day due to the biggest snowfall in three decades and high winds, forcing hundreds of cancellations, officials said.

At least two refineries in the country are planning to adjust their yield to maximise kerosene output over jet fuel and naphtha to meet the increased demand, two South Korean refining sources said.

Amid recently mild winter temperatures and higher margins for petrochemical feedstock naphtha, refiners in South Korea had been producing more of the latter but that trend is now reversing, the South Korean refining sources added.

In Japan, which saw record-breaking snowfall in western and central areas, refiners are drawing down kerosene inventories to meet the sudden spike in demand, traders familiar with the Japanese market said. "It will depend on how cold it becomes and how long this will continue, but for now it's just drawing down of stocks and there is no rush to import any additional kerosene or jet fuel yet," a source at a Japanese refiner said.

Japan's refiners are also reducing jet fuel exports with spot supply in February expected to be "tight", said a second source at a Japanese refiner.

In Taiwan, where most homes do not have central heating in the sub-tropical country, there was a slight demand spike for home heaters though limited for kerosene heaters, two Taiwan-based sources said.

Still, with temperatures going back up in several countries on Tuesday, traders do not expect the demand spike to be sustained.