Japanese refiners recognize need to reduce 95% Middle East crude dependency

Japanese refiners received their spot and term Middle Eastern crude cargoes loaded in June unscathed despite the Israel-Iran clash last month, but feedstock managers stressed the need to actively lower reliance on Persian Gulf supplies in second half of the year.

Japan bought 2.299 million b/d of crude oil from Middle Eastern suppliers in the first half 2025, making up more than 95% of the nation's total refinery feedstock imports of 2.415 b/d during the period, latest data from the Ministry of Economy, Trade and Industry showed.

Aside from a few Suezmax and VLCC cargoes arriving 15 to 40 hours later than scheduled, all June-loaded Persian Gulf sour crude supplies have arrived during the second half of June to July, unaffected by the heightened geopolitical tensions, feedstock and logistics managers at three Japanese refiners, including ENEOS and Taiyo Oil, said over July 31-Aug. 5.

A typical crude tanker voyage from the Persian Gulf to North Asia generally takes around three weeks, they added.

A cargo carrying medium sour Abu Dhabi grade and another carrying Qatari Al-Shaheen crude were among the very few tankers that arrived later than schedule, but buyers of the cargoes declined to be identified or provide further details.

In June, shipments from Japan's top supplier UAE rose 20.4% year over year to 1.035 million b/d, while Qatari crude and condensate imports were up 42.6% from a year earlier at 115,867 b/d, METI data showed. Shipments from Saudi Arabia, however, fell 23.6% year over year to 662,370 b/d in July.

While Middle Eastern sour crude remains a staple for Japanese refiners, the exploration of non-Persian Gulf sources, such as US and Canadian crude, is becoming increasingly vital.

The multiple missile exchanges between Israel and Iran in June had all refiners staying on their toes. This should serve the entire industry as an important lesson that supply diversification efforts must be put into action, according to a market trade flow analyst at an integrated Japanese trading firm and a feedstock manager at ENEOS.

"A drastic and rapid shift would be difficult obviously, because it normally takes months to significantly shift refinery configuration to adopt a brand new feedstock mix and linear programming models... but I think Japan should at least aim to bring [the proportion of Middle Eastern crude imports] to at least around 90%," an inventory management source at Taiyo Oil said.

In July, Shunichi Kito, President of the Petroleum Association of Japan, highlighted that Japanese refiners are increasingly turning to US crude imports to mitigate the risks associated with their substantial dependence on the Persian Gulf supplies.

Although many Japanese refineries are designed to process Middle Eastern crude grades, making it challenging to switch entirely to US imports, Kito indicated that achieving a certain percentage of US crude in the mix is feasible.

This adaptability is crucial for Japanese refiners as they navigate the complexities of blending different crude types while ensuring efficient operations, he noted.

"Crude supply source diversification is not just about securing immediate supplies; it's about building resilience against unforeseen geopolitical events that could jeopardize energy security," the trade flow analyst said.

Japan's top 10 crude suppliers in H1 (Unit: b/d)

Source: Ministry of Economy, Trade and Industry