Japan’s refiners are increasing their crude oil imports from Nigeria as they face a significant reduction in supplies from the Middle East, primarily due to the ongoing conflict involving Iran. This shift highlights the immediate challenges in replacing the majority of their usual crude sources. According to data from the Petroleum Association of Japan, refinery runs for the week ending April 11 were at 67.8% of designed capacity, which is slightly above the previous week’s 67.7%. However, this figure remains well below the more than 80% levels recorded prior to the escalation of the war in late February.
The outlook for May may improve, as Japan has begun releasing oil from its national stockpile and has secured substitutes for over half the volume it imported through the Strait of Hormuz last May. Nevertheless, Middle Eastern crude typically constitutes 95% of Japan’s total imports, making a complete transition to alternative sources challenging. Japanese refineries are specifically optimized for medium-sour Middle Eastern crude, which limits their flexibility to process different grades of oil.
In addition to Nigeria, other suppliers such as Malaysia, Azerbaijan, Brazil, and Angola are expected to benefit from increased exports to Japan. Nithin Prakash, an analyst with Rystad Energy, noted that “Japan could likely push non-Middle East crude to around 30-50% of its slate in the short term, but fully replacing Middle Eastern supply is difficult.” Refiners have the option to blend 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.
The Petroleum Association of Japan has suspended the publication of petroleum product stock data, citing the evolving supply structure. As Japan navigates this transition, Nigeria and other suppliers stand to benefit from the temporary rebalancing of global crude flows.
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