Japan refiners not fretting over Iran crude supply disruptions

Tokyo (Platts)--20Apr2006

Even as the political rhetoric over Iran's nuclear plans has driven crude
prices to fresh highs this week, refiners in Japan are not losing any sleep
over a possible disruption in their crude imports from the Middle Eastern
producer.
Topmost officials of the National Iranian Oil Company were on the phone
with their customers in Japan this week, reassuring and reiterating that they
would keep the crude flowing, no matter what, a senior refinery executive in
Tokyo told Platts. "I see no danger of disruption in Iranian crude supplies,"
he said.
NIOC, which supplies term barrels to Japanese refiners under annual
contracts, has proved to be a "stable and reliable" source down the years, the
executive said, adding, "We have a lot of confidence in NIOC."
Besides, the crude market is currently well supplied and plenty of
replacement barrels are available from the Middle East, should Iranian cargoes
be affected, the source added.
Japan soaked up a little over a fifth of Iranian crude exports last year.
Iranian crude in turn accounted for 13.8% of Japan's total imports of about
4.2 million b/d in 2005.

MARKET PERCEIVES THREAT OVER IRANIAN SUPPLIES
Iran currently pumps about 3.9 million b/d, but its supplies are seen
under threat as the crisis over Tehran's nuclear plans has escalated. Recent
comments by President Mahmoud Ahmadinejad in the game of brinkmanship with the
West have rattled the oil market.
Ahmadinejad Wednesday said world oil prices have not yet reached their
real values, despite their hike in recent years, according to Iran's IRNA news
agency, as monitored by the BBC. Speaking at a joint cabinet meeting with
provincial governors general at the Ministry of Interior, Ahmadinejad said oil
prices should not be lowered on the "pretext that it will prove harmful to
developing states, thus permitting the world powers to benefit the most from
it," IRNA reported.
Last Sunday, Iran Foreign Minister Manouchehr Mottaki warned the US
against attacking its nuclear facilities, saying it had tens of thousands of
would-be suicide bombers at the ready and could count on the support of
militants across the region.
Iran insists its program is strictly peaceful, but has come under
suspicion because enrichment technology can also be extended to make atomic
weapons. The United States is pushing for tough UN action, and several US
press reports over the weekend said that military options were being looked
into. This pushed NYMEX light sweet crude above $70/barrel and then into
uncharted territory when markets opened after the Easter break Monday.

NIPPON OIL ALONE IN REDUCING OFFTAKE
Japan's largest refiner Nippon Oil created a stir in mid-March when it
announced that it would reduce its Iranian crude offtake by about 16% in 2006
compared with 2005, to around 120,000 b/d. Nippon Oil's president Fumiaki
Watari said the cut would be made in volumes the company buys from Japanese
traders, rather than directly from NIOC.
However, other refiners have no plans to follow suit, and some continue
to express bewilderment at Nippon Oil's move and the very public declaration
of intentions.
"So far there is no change on our crude term contracts with Iran," a
crude trader at refiner Idemitsu told Platts. "We intend to continue our crude
procurement from Iran for both spot and term deals," he said. Idemitsu intends
to maintain its relationship with Iran, the trader added.
Nonetheless, "I must admit that we are anxious about the relationship
between Iran and the United States," said the trader. "We will keep an eye on
how the bilateral relations will affect crude oil prices."
--Vandana Hari, vandana@platts.com/Takeo Kumagai,
takeo_kumagai@platts.com/Yuji Okada, yuji_okada@platts.com

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