May 11, 2018 / 10:01 AM / a year ago

Japan's JXTG may buy other Mideast crude oils to cover any Iran shortfall

TOKYO (Reuters) - JXTG Holdings, Japan’s biggest oil refiner, will likely turn to other Middle Eastern suppliers to meet shortfalls if it has to curb Iranian crude purchases after the resumption of U.S. sanctions on Tehran, a senior official said on Friday.

U.S. President Donald Trump’s withdrawal from a 2015 agreement to limit Iran’s nuclear program and re-impose sanctions after a grace period is raising the prospect that refiners in Japan, the fourth-biggest buyer of Iranian crude in Asia, will have to seek alternative supplies.

JXTG buys roughly 4 to 5 percent of its crude supplies from Iran, JXTG Holdings President Yukio Uchida told reporters during a briefing on its full-year results.

That would imply purchases of between 70,000-88,000 barrels per day (bpd) of Iranian crude, based on JXTG’s average refinery run rate of 91 percent in the year through March. JXTG has refining capacity of 1.93 million bpd.

“The producers that have excess supply capacity are mainly in the Middle East,” Katsuyuki Ota, JXTG Holdings senior vice president, told Reuters, when asked about possible substitutes for Iranian crude.

Saudi Arabia is monitoring the impact of the U.S. withdrawal from the Iran nuclear deal on oil supplies and is ready to offset any potential shortage, but the kingdom will not act alone to fill in the gap, an OPEC source familiar with the kingdom’s oil thinking said on Wednesday.

President Trump on Tuesday said he was pulling out of the multi-party nuclear agreement and will re-institute U.S. sanctions against Tehran that were suspended under the 2015 accord. He set a grace period of 180-days for buyers of Iranian crude to cut their purchases.

Oil prices steadied near 3-1/2-year highs on Friday as the prospect of new sanctions tightened the outlook for Middle East supply at a time when global crude production is only just keeping pace with rising demand.

JXTG is not taking any immediate steps and is assessing the situation, Ota said.

“Iran does not supply big volumes for us, so it will not affect our procurement. There’s a half-year grace period and we are not making any moves in particular,” Ota said, adding that the refiner is not planning to stockpile Iranian crude.

Reporting by Osamu Tsukimori; Writing by Aaron Sheldrick; Editing by Tom Hogue

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