Japan is significantly increasing its crude oil imports from Nigeria as it seeks alternatives to its traditional Middle Eastern supply, which has been disrupted by the ongoing conflict in Iran. According to the Petroleum Association of Japan, refinery runs were at 67.8% of designed capacity for the week ending April 11, a decline from over 80% prior to the onset of the conflict in late February. Typically, Middle Eastern crude accounts for 95% of Japan’s oil imports, most of which transit through the Strait of Hormuz. With this supply now under threat, Japan has begun releasing oil from its national stockpile and has secured substitutes for more than half of the volume it imported via the strait last May.
However, Japanese refineries are primarily configured to process medium-sour Middle Eastern crude, which limits their capacity to fully replace these imports in the short term. Industry analysts suggest that Japan could temporarily increase non-Middle Eastern crude to between 30% and 50% of its oil slate. Nigeria is expected to be a significant beneficiary of this shift, along with other suppliers such as Malaysia, Azerbaijan, Brazil, and Angola. Nithin Prakash, an analyst at Rystad Energy, noted that while the transition is feasible in the near term, completely replacing Middle Eastern supply remains a challenge.
To adapt to these changes, Japanese refiners are blending Middle Eastern crude with light-sweet grades from the United States and West Africa, as well as medium grades from the Caspian region and parts of Latin America. This adjustment is likely to enhance yields of gasoline and naphtha while reducing the output of diesel and jet fuel. Additionally, the Petroleum Association of Japan has suspended the publication of petroleum product stock data, citing alterations in the country’s supply structure. As Japan navigates these supply challenges, the increase in Nigerian crude imports represents both a strategic pivot and a potential economic boost for Africa’s largest oil producer.
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