Japan Might Soon Stop Buying Iranian Crude

Even if some Japanese refiners resume Iranian oil purchases thanks to the U.S. waiver, refiners have just a small window to clear all related transactions, so they are likely to finish loading potential cargoes from Iran by the end of March 2019, uncertain that their waiver will be extended beyond May, industry and trade sources tell S&P Global Platts.

Japan was one of eight Iranian oil customers who received a U.S. waiver to continue importing Iranian oil at reduced volumes for 180 days after November 5, the day on which the United States reinstated sanctions on Iran’s oil, shipping, banking, and insurance industries.

Japan’s Economy and Trade Minister Hiroshige Seko said after the waivers were announced that following the suspension of all shipments of Iranian crude to Japanese refineries ahead of the U.S. sanctions, Japanese refiners were now preparing to resume Iranian oil imports.

Even if some refiners decide to resume exports next year, they may be able to load Iranian oil only in January and February, and probably March, according to various industry sources who spoke to Platts. First, refiners would want to have cleared all Iran-related transactions ideally by end-April. Then they will be able to use the Japanese government-backed shipping insurance for Iranian cargoes at the end of March, when the current insurance coverage expires. In addition, by that time, the United States will have expected more cuts from Iranian oil customers even with the waivers, and it’s not clear whether any waivers would be extended beyond the six-month period ending in May.

Still, there will be at least one Japanese refiner probably importing Iranian oil early next year. A source with a Japanese refiner told Platts that the refiner plans to soon launch talks with National Iranian Oil Company (NIOC) for possible shipments, and has already contacted banks to resume oil imports.

The many uncertainties surrounding the waivers and the insurance coverage, however, continue to prompt Japanese refiners to look for alternative oil supplies, industry sources told Platts.

Before the sanctions snapped back, Japan’s imports from Iran averaged 164,900 bpd between January and September, accounting for 5 percent of all Japanese oil imports, according to government data.