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Commodities

Japan taps new options for crude oil suppliers

Japanese companies are looking to import crude oil from the Americas, including West Texas Intermediate.

TOKYO -- Japanese oil companies are buying crude from a broader range of exporters as the overall supply expands, reducing their reliance on the Middle East.

A tanker carrying 300,000 barrels of West Texas Intermediate crude for Cosmo Oil arrived at the Yokkaichi port in Mie Prefecture last month, apparently the first time that a Japanese company imported actual WTI oil rather than buying futures.

After the U.S. lifted the 40-year ban on crude oil exports at the end of 2015, Cosmo Oil decided to buy the WTI crude when the price was low. "This was a fruit of our efforts to build a flexible purchase framework," said Masashi Nakayama, general manager of Cosmo Oil's crude and tanker department.

In light of increased U.S. shale output, Cosmo Oil added the Americas to its list of possible suppliers while starting to buy Mexico-produced crude. The prices are linked to that of WTI, meaning that a buyer can wait for an opportunity to purchase rather than being constrained by long-term contracts commonly used for Middle Eastern oil.

"We are setting our sights on Canada and Ecuador next," Nakayama said, noting that shipping from the Pacific Coast would reduce the transport distance.

"Traders are increasingly asking us to buy leftover oil amid the shale boom," said the head of crude oil trading and shipping at JX Holdings unit JX Nippon Oil & Energy. The manager noted a change in market trends, as his company bought Alaskan oil for a good price in the spot market earlier this month and also has procured oil from exporters such as Colombia and Mexico. "After the lifting of the export ban, we are paying closer attention to U.S. prices."

Idemitsu Kosan is increasing exports from Russia and Venezuela. Russian oil has the benefit of being delivered to Japan within a week, an official at a trading house said. This offers companies flexible procurement options.

Exports from Central and South America accounted for 3.3% of Japan's oil procurement in fiscal 2015, up 1.3 percentage points on the year, the Agency for Natural Resources and Energy said. The figure is 10 times the level seen in fiscal 2010, before the surge in shale oil output. Russian crude's share increased to 8.1% as well. Products from the Middle East slid 20 basis points to 82.5%, a 20-year low.

New oil sellers do not always offer competitive prices. WTI presently hovers above Dubai, the Middle East benchmark, amid a pause in increases of shale gas output and the supply decline stemming from Canadian wildfires. Still, the emergence of new suppliers gives buyers a broader, more diversified range of choices.

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