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Japan buyer loads last Iranian oil cargoes as US sanctions deadline nears

Tokyo — A Japanese buyer has loaded what appears to be the last Iranian oil cargoes for arrival in early October, ahead of US sanctions, as local importers step up procurements from alternative sources, market sources say.

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VLCC Yufusan is scheduled to arrive Japan on October 3 after loading oil at Assaluyeh and Kharg Island in Iran and Mina Al Ahmadi in Kuwait, according to S&P Global Platts trade flow software cFlow.

A Shipping source said that the VLCC is arriving Japan in early October after having loaded Iranian oil.

Japan's imports of Iranian oil in October will come at the time when the government is still pressing the US to allow Japan continue to import Iranian oil, while leaving refiners to make their own decisions over their imports as US sanctions loom on the horizon.

Japanese refiners are expected to settle all of Iranian oil transactions by the end of November 2 (Japanese time) because US sanctions snap back on November 5, a source familiar with the matter said.

US President Donald Trump said on May 8 the US would withdraw from the Iran nuclear deal and re-impose sanctions that have been frozen since January 2016 as part of the Joint Comprehensive Plan of Action.

ALTERNATIVE SUPPLY

With the approach of US sanctions, Japanese refiners have stepped up alternative crude imports from the Middle East and elsewhere.

Some Japanese refiners have covered shortfalls in Iranian oil supplies from Qatar, a source with knowledge of the matter said.

A Japanese buyer of Iranian Oil is looking at Abu Dhabi's Upper Zakum crude, Bahrain's Banoco Arab Medium and US Mars crude as among alternative supplies to Iran's Medium and Heavy grades, a market source said.

The buyer has also bought one Upper Zakum crude cargo for loading in November, the source said.

Another Japanese buyer of Iranian oil said Saudi Arabia, Kuwait and Iraq were among other possible alternative suppliers to Iran.

INCREASED IRAN OIL IMPORTS AHEAD OF SANCTIONS

Japan's Iranian oil imports increased year on year for the third consecutive month in July as refiners rush to take cargoes before US sanctions come into effect in November.

The surge in Iran exports during May, June and July cut Japan's year-to-date decrease in Iranian oil imports to just 1% from a year earlier, compared with a cumulative 13% drop over January-April.

Over January-July, Japan imported an average of 165,343 b/d of Iranian oil, compared with 153,074 b/d imported over January-April. -- Takeo Kumagai, takeo.kumagai@spglobal.com, Ada Taib, ada.taib@spglobal.com, newsdesk@spglobal.com -- Edited by Jonathan Dart, newsdesk@spglobal.com