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Saudi Arabia has continued shipping crude oil to Japanese
refiners without any major impact observed so far after the attacks
on Saudi Arabian infrastructure. The recovery has been impressive,
with Saudi Arabia having fully met nominated volumes so far, with
November ship loadings confirmed to take place as requested and no
changes in crude grades. Some loadings in early October were
subject to change grades, but this is no longer the case.
According to IHS Markit Commodities at Sea,
Japan imported 1.16 million b/d of Saudi crude oil in October, with
a growth of 6.7% month-on-month to report. Total imports surpassed
three million b/d, after a sharp decline in September. This will
bring imports back to normal levels. Japanese imports are now
marginally lower than a year ago, with a decline of only 0.15%.
Quite interestingly, the country increased its reliance on the
Middle East Gulf, by quickly importing more from the UAE and other
regions across the Gulf, but still avoiding Iranian barrels.
The increased crude oil exposure of Japan from the Middle East
Gulf explains the country's decision to send ships to the region to
protect commercial oil vessels. However, Japan will not join the
US-led coalition already protecting commercial shipping in the
region.
Moreover, Japan and Saudi Arabia agreed to renew a joint crude
oil storage scheme in Okinawa which was due to expire in October.
This will allow trade between the two countries to continue
flourishing, providing quick and easy access to other key customers
of Saudi Arabia across the Far East.
Meanwhile, Tokyo can ensure that the supply of Saudi Arabian
crude oil will remain stable amid increasing geopolitical events.
Tokyo has been paying for storing Saudi Arabian oil at leased
storage tanks in Okinawa under the "Joint Crude Storage by
Producing Countries", agreement with Saudi Aramco. In return, Japan
has priority to the crude oil stored at Okinawa for commercial
purposes, which can reach 8.18 million barrels, in the event of an
emergency.
Crude imports from Saudi Arabia average 1.19 million b/d so far
in 2019, accounting for more than a third of total oil imports.
Saudi Aramco has shipped crude oil cargoes from the storage in
Okinawa twice so far this year, including a rare Arab Light crude
cargo which was shipped to a PetroChina refinery in central Hebei
province in mid-October.
Posted 04 November 2019 by Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime, Trade & Supply Chain, S&P Global Market Intelligence
