Japan pivots to US crude as April imports hit record low

Japan's crude imports fell to a record low in April due to Persian Gulf tanker disruptions, but inflows may recover to about 2 million barrels/day in June amid the arrival of delayed Middle East cargoes, increased US crude purchases and new supply collaborations with South Korea, according to the trade ministry and refining industry sources over May 29-June 2.

Japan imported 853,329 b/d of crude in April, down 65.7% year over year and 59.5% month over month, the latest data from the Ministry of Economy, Trade and Industry issued May 29 showed.

"This was the lowest since data [became] available online after 1989," a METI official told Platts, part of S&P Global Energy, on May 29.

Most March spot and term cargoes loaded with Arab Extra Light, Arab Light, Arab Heavy, Kuwait Export Crude, Qatar Marine, Al Shaheen, Upper Zakum, Das Blend and Murban crude grades failed to escape the Persian Gulf and Strait of Hormuz to arrive in Japan on schedule in April, feedstock managers at three Japanese refiners, including the country's top refiner, ENEOS, told Platts over May 29-June 1.

Shipments from top supplier Saudi Arabia in April fell 59% year over year to 369,599 b/d, while UAE crude arrivals tumbled 70.4% year over year to 334,724 b/d, METI data showed.

However, refiners have managed to secure prompt-month spot US crude cargoes from the second week of March, with Cosmo Oil receiving a Suezmax cargo of light sweet US crude on April 27 after the tanker took the shorter Pacific Ocean route via the Panama Canal.

Japan imported 63,753 b/d of WTI Midland crude from the US in April, up 22% from March, METI data showed.

Diversification, collaboration

Japan's crude oil procurement and arrivals are expected to have exceeded 1.5 million b/d in May, while shipments from June are projected to approach 2 million b/d, as several Persian Gulf crude tankers have recently bypassed the Strait of Hormuz chokepoint, and some Abu Dhabi grades are regularly reaching the Far East, refinery feedstock managers in Japan and traders based in Singapore said.

The Idemitsu Maru crude oil tanker, carrying nearly 2 million barrels of Saudi crude, passed through the Strait of Hormuz on April 28. The VLCC is managed by Idemitsu Tankers, a subsidiary of Japan's second-biggest refiner, Idemitsu Kosan.

Meanwhile, ENEOS Holdings-operated VLCC ENEOS Endeavor has transited the Strait of Hormuz and is expected to arrive in Japan between the end of May and June.

Although some Middle Eastern crude cargoes could escape the Persian Gulf and make their way to Japan over the coming months, the Japanese refining industry must ramp up US and other non-Middle Eastern crude procurement, the refinery feedstock managers told Platts on June 2.

The US is by far the largest non-Middle Eastern crude supplier to Japan, and the industry as a whole should aim to secure, on average, at least three VLCCs per month, or about 200,000 b/d, of US crude in 2026, according to refinery feedstock managers.

In addition, Japan and South Korea -- Asia's biggest US crude buyer -- plan to collaborate more closely to improve trading and procurement of oil and gas from international spot markets. This partnership aims to provide the Japanese refining industry with logistical support and supply network guidance from South Korean traders, who possess expertise in North American crude arbitrage, refinery feedstock management and trading, refinery feedstock managers and traders told Platts over May 29-June 2.

South Korean President Lee Jae-myung and Japanese Prime Minister Takaichi Sanae held a summit in Andong on May 19 to strengthen cooperation in energy security and supply chain resilience.

"South Korea and Japan agreed to enhance energy security by facilitating cooperation in oil and petroleum product swaps, mutual supply, oil procurement and transportation, leveraging their common status as oil importers and their competitiveness in refining and petrochemical industries," South Korea's Ministry of Trade, Industry and Resources said in a statement June 1.

Reflecting the collaboration, a trading arm of a Ulsan-based major South Korean refiner sold 1 million barrels each of WTI Midland and Mars Blend crude for Aug. 10-20 delivery to Idemitsu at a premium of more than $20/b to Platts front-month Dubai, traders based in Singapore and feedstock managers at Japanese and South Korean refiners with close knowledge of the matter told Platts over May 18-June 1.

Japan's top 10 crude suppliers in April

Japan's top 10 crude suppliers over January-April

Source: Ministry of Economy, Trade and Industry