Japan refiners deploy VLCCs for ship transfers, US crude amid Hormuz disruptions

Supertankers time-chartered by Japan's oil refiners are facing a challenging situation, changing the basic mechanism of crude trade by doing ship-to-ship, or STS, transfer in Malaysia, even as some of them are partially idle due to disruption at the Strait of Hormuz, while others are tapping the US market, several tanker brokers, owners and charterers told Platts, part of S&P Global Energy, June 9.

"It is a very challenging situation because Japanese tanker owners do not permit the VLCCs they have chartered out to call ports in the Red Sea, Persian Gulf and even Fujairah and Oman," said a chartering source.

Two tanker brokers said that only the shipping company, NYK, permits the loading in Mina-al-Fahal on a case-by-case basis. An NYK spokesperson confirmed that its ships do not pass through or call at the Strait of Hormuz and the Red Sea, but prohibition has been lifted in some parts of Oman.

Senior executives at another major tanker owner, Mitsui OSK Lines, or MOL, also confirmed that its tankers are currently not loading cargoes in the Persian Gulf, Red Sea, Fujairah and the Gulf of Oman.

Executives at Japanese refining companies said they are saddled with a large number of VLCCs, which were taken on time charter much before the war began in the Persian Gulf, and the region was then the source of about 90% Japan's crude supplies. Before the war, Japan had a crude refining capacity of about 3.1 million barrels/day, but a part of it is now underutilized, they said.

Since these VLCCs are no longer able to call ports in the Persian Gulf and Fujairah, and in most cases even Mina-al-Fahal in Oman, they are seeking alternative opportunities.

Crude transfers in Malaysia

For decades, Japan and other Asian countries have enjoyed direct shipments of cargoes from the Persian Gulf to the destination ports.

However, now with dozens of tankers idle, the trade has improvised, and four sources with tanker brokerages and chartering companies said Japanese refiners hire tankers in the spot market to load cargoes in Yanbu, Fujairah, and Mina-al-Fahal, which then bring the cargoes to Malaysia, where they are transferred to Japanese VLCCs in Linggi and Tanjung Bruas.

In some cases, an STS has also been explored in Nagasaki, they said. For safety reasons, such STS transfers are not conducted at Malaysia's Tanjung Pelepas, as the queue is serpentine, there is congestion and slots are fully booked for a longer time duration, said a source with direct knowledge of the matter.

Japanese refiners control about 50 VLCCs, of which almost 40 have been taken on time charter from local shipowners, according to estimates from tanker brokerages. It is these VLCCs that face voyage restrictions due to the Strait of Hormuz disruptions, market participants said.

Japan's refineries have also offered their VLCCs to charterers in countries such as China and South Korea, but there are few takers due to a large tanker surplus amid global trade disruption. Tanker brokers estimate the global VLCC fleet at about 885, including a dozen delivered this year. Another two dozen VLCCs are expected to be delivered during the rest of 2026, they said.

Lifting cargoes from the US

Some of these VLCCs are also being employed to load cargoes from the US, sources at Japan-based refining companies said. While most refineries are operating below capacity to meet their requirements, they have diversified to load more cargoes from the US, two chartering executives and brokers said.

They estimated that volumes equivalent to 10-14 VLCCs are being loaded every month in the US and Mexico. This includes shipments in smaller-sized ships such as Aframaxes.

Japan's largest oil refiner by volume, Eneos, declined to comment. Idemitsu and Cosmo Oil have yet to respond to requests for comment by Platts.

Japan's refineries are typically designed to process lighter crudes, and therefore, the American WTI grades are considered more suitable for import, a dirty tanker broker said.

However, two cargoes of relatively heavier grades have recently been sourced from Mexico as well, a refining source said. Several cargoes of Arabian light crudes have been lifted from Yanbu, both on delivered and free-on-board basis, brokers and charterers said. These cargoes are moved from inside to the Persian Gulf to the Red Sea on the East-West pipeline, they said.