Japan's refinery operating rate remains low, Middle East crude oil cut-off, alternative supplies encounter bottlenecks

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The latest data from the Japan Petroleum Association shows that as of the week of April 11, the country's refinery operating rate was 67.8 percent, which was basically the same as the 67.7 percent in the previous week, and only maintained at around 2/3 production capacity

According to the latest data from the Japan Petroleum Association, as of the week of April 11, the operating rate of refineries in the country was 67.8, which was basically the same as the 67.7 in the previous week. It was only maintained at about 2/3 production capacity, which was far lower than before the Iranian conflict broke out at the end of February. The 80% operating level highlights the severe dilemma faced by Japan's crude oil replacement supply in the short term after the interruption of crude oil supply in the Middle East.

There are hard restrictions on the high dependence on Middle East crude oil to replace supplies.

The Middle East accounts for as much as 95 per cent of Japan's crude oil imports, and related supplies have shrunk significantly since the outbreak of the conflict. Officials said that the situation may improve next month. Japan has used its national oil reserves and locked in alternative sources for more than half of the crude oil imports in the Strait of Hormuz. However, the Japanese refinery unit has been adapted to the Middle East medium-quality sour crude oil for a long time, and there are obvious restrictions on the processing capacity of other crude oil. Energy consulting agency analysts pointed out that in the short term, the proportion of non Middle East crude oil may be increased to 30% ~ 50%, but complete replacement is almost impossible.
The new supplies are mainly from the United States, and Japan is also in contact with domestic oil producers such as Malaysia, Azerbaijan and Brazil. Refineries can mix Middle Eastern crude oil with light, low-sulfur crude oil from the United States and West Africa, but this will directly change the structure of refined oil output-gasoline and naphtha yields rise, and diesel and jet fuel production falls. Affected by changes in the supply structure, the Japan Petroleum Association has suspended the release of refined oil inventory data.
Refiners such as Luguang Xingchan are actively broadening the scope of crude oil procurement, but processing non-Middle East crude oil generally faces equipment adaptation problems, only Sun Oil said its device can process more than 50% of non-Middle East crude oil.

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