After showing larger-than-usual fluctuations in monthly volumes during the second quarter of 2013, Japan’s crude imports from Iran look likely to stabilize for the next few months at least, as Tokyo seeks a further exemption from US sanctions in September.
So far Japanese buyers have been able to maintain their imports of Iranian crude, albeit at a significantly reduced rate, with ample supplies of alternative crudes, notably from Saudi Arabia and Kuwait.
But recent import data show unusually big swings in the amount of Iranian crude being imported into Japan, with volumes plummeting to just 7,549 b/d in April and then seeing a 32-fold rise the following month.
Delays by refiners in renewing term contracts with Iran in April coincided with the rolling over of shipping insurance provided by the Japanese government beyond April 1, according to sources familiar with the matter.
The April decline was also attributable to delays by refiners in renewing their contracts with the National Iranian Oil Company as they waited for the US to extend Japan’s exemption from financial sanctions targeting oil trade with Tehran, sources familiar with the matter said. Washington extended the waiver for another 180 days on March 13.
But Platts’ tracking of Japanese crude imports from Iran shows that Japan’s imports have stabilized from June onward.
Imports of Iranian crude in July amounted to some 3.5 million barrels, down 10% from 3.9 million barrels in June, according to an August 9 Platts estimate based on tanker tracking data and industry information.
Based on this estimate, Japanese imports of crude from Iran are expected to have averaged around 113,000 b/d in July, against the official figure of 128,544 b/d in June reported by the Ministry of Economy, Trade and Industry.
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The latest data show that Japan imported roughly 185,135 b/d over the January-June period, which is substantially below the 240,101 b/d imported during the first half of last year but greater than the 139,357 b/d imported in the second half of last year.
Last year, Japanese crude imports from Iran were made possible by the introduction at the end of June of a new supplementary insurance framework set up by the Japanese government to get around the EU’s ban on protection and indemnity cover for tankers carrying Iranian oil, which came into effect July 2012.
During the month when that P&I “ban” from Europe first went into effect, Japan imported no Iranian crude at all. Barrels loaded in late July did not show up in Japan’s import statistics for the month as the Iran-Japan voyage takes around 19 days.
Some Japanese buyers of Iranian crude are now cautious about the potential impact of a bill passed on July 31 by the US House of Representatives that would, if enacted, oblige Asian importers to cut their collective purchases of Iranian oil by a further 1 million b/d.
The bill, introduced late February and passed by the House Committee on Foreign Affairs in May, would oblige countries to make progressive reductions in their purchases of Iranian crude in order to qualify for the series of 180-day waivers that enable them to continue buying from Iran, while giving their banks continued access to the US financial system.
The bill is expected to go to the upper house, the Senate, in the autumn but it remains unclear what final the legislation may take and how these additional US sanctions against Iran would impact buyers of Iranian oil, including Japan.
What is clear for now is that Japan’s imports of Iranian crude are set to continue to show year-on-year declines (although not to the same extent as seen in April), in line with an agreement with the US that will allow Japanese banks continued access to the US financial system in return for a pledge to reduce the country’s purchases of Iranian crude.
