Japan’s crude imports are in structural decline. The country is increasingly dependent on Saudi Arabia and the UAE, according to Vortexa.
The decrease in Japan’s crude imports from 2022 to 2024 can be attributed to falling domestic demand for transportation fuels, Ivan Mathews, head of market analysis, APAC, Vortexa, said in a report.
This fall is due to an ageing and shrinking population, and the shift towards lower-carbon fuels, according to Mathews.
Crude arrivals in Japan in 2024 were at the lower end of the 2016-2024 9-year seasonal range, according to Vortexa’s extensive historical data, highlighting the long-term decline.
“We expect continued downward pressure in Japan’s crude imports for the rest of this year,” Mathews said.
Lower crude imports into Japan in April are likely due to falling domestic demand, not refinery closures.
Macroeconomic factors
The slowdown in global trade will likely put pressure on Japan’s export-oriented economy, according to Vortexa.
The base tariffs of 10% on Japanese imports imposed by the US and the potential economic slowdown in China, a major trading partner of Japan, are responsible for this.
This comes in addition to the usual second-quarter drop in Japan’s crude imports, due to refineries lowering crude throughput.
Domestic refining margins and crude throughput will be pressured by falling demand for diesel, marine gasoil, and fuel oil, due to weaker industrial and shipping activities.
As a result, crude arrivals into Japan are likely to decrease for the rest of the year compared to 2024 figures, Mathews added.
Reliance on the Middle East
The Japanese refining system is configured to run sour crude, which is why Japan’s crude imports are mainly from the Middle East.
The import of crude oil has decreased overall, but the country’s dependence on crude oil from Saudi Arabia and the United Arab Emirates has increased over time.
The decrease in crude oil imports into Japan from 2022 resulted from reduced shipments from several countries, including Russia, Kuwait, and Qatar, Vortexa said.
Imports of crude from Saudi Arabia and the UAE experienced a less significant decline during the same period, even though these countries had greater output cuts in the second half of 2023 and 2024 compared to other OPEC+ members, according to the ship tracking agency.
“This likely implies that Japanese refiners have a higher proportion of longer-term contracts with Saudi Arabia and the UAE, compared to other suppliers,” Mathews said.
While this agreement ensures a stable supply, it also limits the diversification of the country’s import sources. Japan is almost fully dependent on crude imports.
The OPEC+ group, which includes Saudi Arabia and the UAE, has planned to increase oil production in April and May of this year.
Mathews said:
With Japan’s crude imports set to decline further in the months ahead, we may see an even higher percentage of arrivals from Saudi Arabia and the UAE.
Limited refining competitiveness
The net imports of clean petroleum products (CPP) have generally increased over time and are in contrast to crude oil.
March 2025 was the second-highest level on record, according to Vortexa.
Japan’s refining sector is not competitive, and this is the reason for this development, not strong domestic demand.
The influx of products from the Wider Arabian Sea (India West Coast and Middle East) into Asian markets, coupled with new regional refining capacity, is creating a challenging environment for Japanese refiners to export their products into these regional markets, Mathews said.
The increase in Japanese net product imports is driven by declining exports, he added.
Given challenging refining margins, this trend is unlikely to reverse anytime soon, providing another reason for lacklustre crude imports in the coming months.
The post Japan’s crude oil imports in structural decline, dependence on Middle East grows appeared first on Invezz