Japan refinery runs climb to over 70% on alternative supply, stockpile releases
- Weekly refinery runs in Japan cross back to over 70% in May
- Companies source alternative crudes, tap stockpiles
- LNG stocks rise slightly, remain below year-ago levels
Japanese refineries increased their oil processing to over 70% of their capacity for the first time since March, Petroleum Association of Japan data showed on Wednesday, as they consumed crude released from stockpiles and alternative supplies.
After the U.S.-Israeli war with Iran started in late February, Japan, usually reliant on the Gulf for around 95% of its oil imports, switched to crudes originating from the U.S., the Caspian region, and Latin America and bought a cargo of non-sanctioned Russian oil.
From March 16, the government has also made available oil from its stockpiles equal to about 75 days' worth of consumption to soften the blow from the supply shortage due to the largely closed Strait of Hormuz. This is Japan's biggest oil release ever.
As a result, utilization rates at Japanese refineries climbed to 77.3% of designed capacity in the week to May 2 and were at 73.3% of capacity in the week to May 9, the PAJ data showed, up from below 70% seen through April. The PAJ released two weeks' worth of data because of the Golden Week holidays last week.
Idemitsu Kosan and Cosmo Energy Holdings, Japan's second- and third-largest refining companies, respectively, said this week they were sourcing oil from the Gulf that bypasses the Strait of Hormuz, among other places, and aimed for refinery utilization rates of over 90% this fiscal year.
Idemitsu Kosan said on Tuesday it expects Hormuz to reopen for navigation somewhere between July and September, with benchmark Dubai oil prices declining to pre-war levels by the end of the next fiscal year ending in March 2027.
Cosmo Energy expects Gulf crude oil production to normalize in August with procurement stabilizing from September onwards, it said on Tuesday.
On Wednesday, oil prices remained above $100 per barrel as investors continue pricing in Middle East supply disruptions from the war.
LNG STOCKS UP. Because Japan only buys about 6% of its LNG imports from supplies that must transit the Strait of Hormuz, there has been less impact from the war on its gas buying.
LNG stockpiles held by major Japanese utilities slightly increased to 2.12 million metric tons as of May 10 from 2.07 million tons a week before, according to the industry ministry, but remained below year-ago levels.
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