Japan oil firms agree output cuts

Demand for oil falls due to stagnating car sales...

Weak domestic demand for oil from drivers and from industry has spurred Japan's two leading oil refineries to cut output.

... and more efficient engines

Nippon Oil and Idemitsu Kosan said they would work together to agree on the cuts.

"The number of people in Japan is not increasing, and neither is the number of cars, which are also becoming more fuel efficient," said Idemitsu spokesman Tomoki Ohira.

"We have already passed the peak in oil demand in Japan," he added, citing increased use of nuclear energy and a weak economy as additional reasons why "the demand for oil just keeps falling".

Improved efficiency

Idemitsu, which would make the largest cuts, said it would slice about a quarter off its daily output, taking it from 830,000 barrels a day to 640,000 barrels a day.

As part of the cuts, Idemitsu would, over time, close a refinery near Osaka and a subsidiary in Okinawa.

Idemitsu said the cuts would bring about 6bn yen (£30.8m; $48.6m) in cost savings.

Nippon would reduce output by 10,000 barrels a day and supply 40,000 barrels a day to Idemitsu, saving 300m yen in the process.

"Amid signs of a slowdown in domestic demand for oil products, we are facing a glut of over-capacity," said Nippon Oil president Fumiake Watari.

"We decided to make our production more efficient."

Analysts welcomed the refineries' attempts to reduce overcapacity.

Nippon shares rose on the news. Idemitsu shares are not listed.