Saudi Arabia lost its position as the largest crude oil supplier to Japan in August as relatively expensive heavy-end crude grades prompted refiners to seek lighter Abu Dhabi crudes during the trading cycle.
Reflecting the tight availability of heavy-end crude oil early in the third quarter because of OPEC output cuts, as well as sanctions on Iran and Venezuela, the official selling prices of heavy sour Saudi grades jumped to multi-year highs during early third quarter, incentivizing Japanese refiners to reduce Saudi oil imports sharply in August.
Japan’s crude imports from Saudi Arabia dropped 20.6% year on year to 922,824 b/d in August, led primarily by lower imports of Arab Medium crude, according to preliminary data released Monday by the Ministry of Economy, Trade and Industry.
Crude imports from the UAE, which regained the top supplier position in August, rose 9.9% year on year to 1.10 million b/d as Japan boosted imports of light sour Murban and Das crude.
Japan’s intake of light sour Umm Lulu crude of about 1.48 million barrels in August, nearly triple July’s 499,278 barrels, also helped boost imports of Abu Dhabi crude because there were no imports of the grade in August 2018.
EXPENSIVE HEAVY SAUDI GRADES
Industry sources said Middle Eastern crude cargoes that arrived in Japan in August may have originally loaded in July as the voyage time from the major Persian Gulf crude loading terminals to Northeast Asia is typically 25-30 days.
Relatively expensive price tags on heavy-end crude grades in the Middle East during Q2 and early Q3 could have prompted various Northeast Asian refiners to tweak their crude slate in favor of lighter crude, industry and market sources said earlier.
Reflecting the tight availability of heavy-end crude oil early in Q3 because of the OPEC/non-OPEC output cuts, as well as sanctions on Iran and Venezuela, Saudi Aramco set the official selling price for its Arab Medium crude for loading in July and bound for Asia at a premium of $1.95/b to the monthly average of Platts Oman/Dubai assessments.
The July differential marked the highest OSP premium since Platts Oman/Dubai plus $2.75/b set for cargoes loaded in January 2012.
The OSP differential for Arab Heavy crude for loading in July and bound for Asia was set at a premium of 75 cents/b to Platts Oman/Dubai, also marking the highest since January 2012.
SAUDI CRUDE SUPPLY
Japan’s Saudi crude imports may remain lower than a year earlier in the coming months in the wake of the Saudi oil facility attacks on September 14.
Japanese refiners have been assured they will receive their full Saudi Arabian term crude supply nominated for loading in October, despite recent attacks at oil facilities in Saudi Arabia over the weekend, Petroleum Association of Japan President Takashi Tsukioka said on September 19.
However, it remains unclear whether Japanese refiners will receive their full term volumes beyond November.
“Aramco’s ability to supply crude of the specified quality is also uncertain. Reportedly, a number of Chinese and Japanese refiners have been asked to take heavier grades for their October loadings,” S&P Global Platts Analytics said in a weekly report.
“This suggests Aramco is facing difficulties fulfilling term commitments for lighter grades, though notably the majority of Asian refiners have reported no change to their supplies.”
The suspension of Iranian oil imports ahead of the US sanctions waiver expiry on May 2 has helped boost imports from other Middle Eastern suppliers such as the UAE and Qatar in recent months. But the overall share of Middle Eastern imports has been trimmed due to increased imports from the Americas, among others.
Qatari crude imports jumped 10.7% year on year to 319,429 b/d in August, when Japan’s Russian crude imports surged 20.9% year on year to 211,198 b/d in the month.
Ecuadorian crude imports were 54,278 b/d in August, quadruple the 13,496 b/d a year earlier mainly due to increased imports of Napo crude. Japan’s Ecuadorian crude imports have increased in recent months as some refiners are taking Napo to replace Iranian Heavy, blending with lighter grades from the Middle East.
Middle Eastern suppliers’ share of Japan’s crude imports fell to 88.1% in August from 89.2% a year earlier, marking the sixth consecutive year-on-year decrease, according to METI data.
In August, Japan imported 264,084 barrels of Oguendjo crude from Gabon for the first time, with the country also taking the maiden crude Ichthys condensate cargo of 647,258 barrels from Australia.