November 14, 2017 / 10:09 AM / a year ago

Japanese oil refiner profits rise as they max out runs to cash in on high margins

TOKYO, Nov 14 (Reuters) - Profits for Japanese oil refiners rose for the latest reporting period as they pushed their plants at the highest rates in 46 years amid high margins and after a government mandated industry consolidation.

Japan’s biggest refiner, JXTG Holdings, and other processors also raised their full-year profit forecasts because of the increase in margins from converting crude oil to gasoline, diesel and aircraft fuel.

“Domestic margins for gasoline and light distillates were excellent in July to September when they hovered at more than 11 yen ($0.10) (per litre)” Katsuyuki Ota, a senior vice president at JXTG told an earnings briefing on Friday.

“Because crude prices rose, the margins expanded.”

JXTG, formed from a merger of Japan’s biggest and third-biggest oil refiners, on Friday reported a 195.4 billion yen ($1.72 billion) operating profit in the six months ending on Sept. 30, compared with a combined profit of 118.6 billion yen for JX Holdings and TonenGeneral Sekiyu a year earlier.

JXTG, which meets about half of Japan’s domestic oil demand, also projected full-year operating profit of 400 billion yen, achieving the goals for the new firm one year ahead of plan.

Japan, the world’s fourth-largest oil user, has cut refining capacity by more than a quarter since 2009 to 3.52 million barrels per day (bpd), under pressure from the government as fuel demand has declined due to a shrinking population.

Refinery profits gained and margins rose because of the capacity cuts even though domestic fuel demand in the six months ending in September dropped to a 31-year low of about 2.8 million bpd, according data from the Ministry of the Economy, Trade and Industry.

The average utilisation rate for Japanese crude processing units was 95.4 percent in August, the highest since 97.9 percent recorded in March 1971, according to the Petroleum Association of Japan.

The refiners said the profits from oil refining business more than offset small inventory losses due to high oil prices at the start of the year.

Idemitsu Kosan Co on Tuesday said net profit in the six months through September more than doubled to 57.33 billion yen. The company also raised its full-year profit forecast to 100 billion yen from 89 billion yen.

Showa Shell Sekiyu reported on the same day a 71 percent increase in profit while raising its forecast for the full-year by nearly 25 percent to 52 billion yen.

There is still no progress in the planned merger between Idemitsu and Showa Shell after opposition by the Idemitsu founding family but the companies have been consolidating some operations, Idemitsu officials said.

Cosmo Energy Holdings on Thursday said net income for the six month through September rose more than five times to 22.39 billion yen and more than doubled its full-year profit forecast. ($1 = 113.8700 yen)

Reporting by Osamu Tsukimori; Editing by Aaron Sheldrick and Christian Schmollinger

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