Instability in the Middle East is casting a shadow over Japan’s crude oil procurement. While disruptions involving alternative routes through the Strait of Hormuz are prompting shipments to take major detours, rising transport costs are raising concerns about pass-through to end-product prices.
The Ministry of Economy, Trade and Industry said Japan’s crude oil procurement volume in September is expected to fall to approximately 80% of the year-earlier level, while more than approximately 100% is expected to be secured in October. This suggests that although procurement is becoming more diversified, supply volumes may temporarily decline.
At the same time, the maritime blockade of the Bab el-Mandeb Strait in the Red Sea, an alternative route to the Strait of Hormuz, has led Japanese companies to increasingly use significantly longer detour routes. This is expected to drive up transport costs.
Some shipments due to arrive in Japan may be delayed as routes are switched to the northern route via the Suez Canal. Transit times are expected to extend from approximately 3 weeks to approximately 8 weeks, while the need to arrange more tankers is also emerging.
The share of Middle Eastern crude in October procurement is expected to remain high. Although the share of Saudi crude has not been disclosed, it is expected to account for a substantial volume.