Japan Seeks North America Crude as Hormuz Disruptions Deepen

Japan is exploring crude supply options from North America and beyond as the Strait of Hormuz closure disrupts global oil flows and forces buyers to secure alternative sources.

(Reuters) — North America is one potential alternative source of crude oil for Japanese oil refiners, with Ecuador, Colombia and Mexico also seen as possible options, Japan Petroleum Association President Shunichi Kito said on March 23.

Oil buyers across the globe have been looking to replace supplies on tankers stuck in the Gulf region because of the U.S.-Israeli war on Iran and subsequent closure of the Strait of Hormuz.

"Japanese oil companies are exploring procurement options from various countries or dispatching vessels to them," Kito told a press conference.

Procurement of crude oil is the top priority, even if soaring freight rates and insurance fees incur higher costs, he added.

Oil prices have spiked to more than $100 a barrel as the Strait of Hormuz, a major supply route for global oil and LNG, remains closed.

In an attempt to soften the supply crisis, U.S. President Donald Trump's administration has temporarily waived sanctions on the purchase of Russian and Iranian oil stranded at sea.

Japan has no immediate plans to import oil from Iran or Russia other than from the Sakhalin 2 project, Kito said.

Kito, who is also chairman of Japanese oil refiner Idemitsu Kosan, said the crisis should serve as an opportunity for Japan to diversify supply sources in the long term.

Japan, which imports 95% of its oil from the Middle East, should invest in crude oil production in Alaska to diversify supply, he said.

If the Iran crisis continues, the Japanese government should also consider a second round of oil release from its strategic stockpiles on a similar scale to the first round, Kito said, after Japan started to tap reserves last week.

The International Energy Agency is consulting with governments in Asia and Europe on the release of more stockpiled oil, Executive Director Fatih Birol said on March 23.