Oil report

Japan refiners need to cut more capacity as demand falls - PAJ

TOKYO, July 24 (Reuters) -

* Japanese oil refiners need to cut more production capacities as domestic demand is expected to decline further, the head of the Japan Petroleum Association (PAJ) said after JXTG Holdings Inc’s plan to close its Osaka refinery.

* “Japanese refiners with ageing facilities fall behind South Korean rivals with large export-targeted facilities in terms of cost competitiveness,” PAJ President Takashi Tsukioka, who is also the chairman of refiner Idemitsu Kosan Co Ltd, told reporters on Wednesday.

* “Japanese oil refiners will need to close more facilities to meet sliding demand, but we don’t know how long that has to continue,” he said.

* For Japanese refiners, oil loading and shipping from the Middle East remain as usual despite heightened tensions in the area after a U.S. Navy ship took defensive action against a second Iranian drone in the Strait of Hormuz last week, Tsukioka said.

* But Japanese refiners are studying measures to handle potential disruption to crude supply from the Middle East amid mounting tensions around the Straits of Hormuz, Tsukioka said, without giving any example of specific measures. (Reporting by Yuka Obayashi; editing by Gopakumar Warrier)