Japan will maintain its strategy on the oil reserves despite anticipating a drop in crude oil imports in September, the government believes that the volume already authorized and alternative supplies will be sufficient to meet the country’s needs.
Japan’s oil imports expected to fall by 80% in September
According to the Minister of Economy, Trade and Industry, Ryosei Akazawa, the crude oil supply the expected supply for September is approximately 80% of the monthly reference average. In August, the supply was around 100%.
However, this temporary reduction will not lead the Japanese government to approve a new release of its national crude oil reserves.
Akazawa explained that oil is still available within the reserves whose release had been previously authorized. Progress in securing alternative supplies allowed for the preservation of some of those volumes.
In this way, Japan could use that available amount to compensate for the lower crude oil flow expected during September and maintain a supply level similar to the previous monthly average.
Bab el-Mandeb disrupts the routes of oil tankers to Japan
On the other hand, the expected decline is related to the alterations in maritime transport of oil in the Red Sea. The risks to navigation in the Bab el-Mandeb strait these threats have forced some tankers to alter their routes. The threats against vessels using this strategic corridor are leading tankers to take longer journeys. This change in route directly impacts delivery times for oil destined for the Japanese market.
A tanker using the usual route can take between 21 and 23 days to reach Japan; however, shipments affected by the diversions can take around 55 days, according to data released by Akazawa. This difference explains a large part of the temporary supply reduction expected for September.
Japan maintains oil reserves to cover supply
Despite the delay in shipments, the Government believes it has sufficient leeway to deal with the situation without authorizing another extraordinary release of strategic oil reserves.
Of the national reserves whose release had already been decided, a portion remains unused thanks to progress in securing alternative supplies. Using this portion would guarantee a crude oil supply by September equivalent to that of an average month last year, Akazawa explained.
In addition, authorities expect crude oil purchases to recover to near-average monthly levels in October, the decision allows Japan to retain a portion of its strategic capacity while using previously authorized volumes as a backup in case of logistical delays.
Energy dependence remains a challenge for Japan
Furthermore, the situation once again highlights the high exposure of Japan to hydrocarbon imports, the country has historically relied on the Middle East for a very large portion of its oil purchases. This concentration makes disruptions to shipping routes and regional conflicts significant factors for its energy security.
In March, Japan announced the release of 80 million barrels of crude oil and fuels due to supply difficulties caused by the conflict in the Middle East. This volume was equivalent to approximately 50 days of demand.
Since then, Japanese authorities have sought to diversify the origin of imports by purchasing crude oil from Canada, Azerbaijan, and African producers.
However, this strategy also entails higher costs for an economy that relies heavily on the international market for its energy raw materials. The import bill reached $89.46 billion in July, according to data included in the available information.
For now, the government is focusing on managing previously released volumes and alternative supplies before resorting again to its strategic reserves. The evolution of shipping routes and the recovery of imports in October will be key to determining whether this strategy can be sustained.
Source: Oil Price
Photo: Shutterstock
