Japan will increase oil imports from Iran when its contract with the Persian Gulf country runs out in April, as Japanese tankers are making their way into the Persian Gulf to ship Iranian crude back home.
The country's intake of Iranian crude currently stands at 110,000 barrels per day, but the volume is poised to rise when the two sides sign a new contract in April, Oil Ministry's official agency Shana said on Saturday without giving details.
Data provided by Platts show Japan imported an average of 168,777 bpd of crude from Iran in 2014, which made up roughly 5% of its crude imports. Its mid-2015 imports accounted for 158,000 bpd.
Introduction of tougher sanctions by the US and the EU cut Iran's oil exports by more than half to slightly more than 1 million bpd.
Japan, China, South Korea and India are regarded as traditional customers of Iran's oil. Speculations on Japan's imports come as Seoul, another major buyer of Iran's crude in East Asia, said last week it is open to raising imports from Iran if it receives a discount of $2-3 per barrel.
Negotiations to boost crude exports to Japan gained momentum after Iran and six world powers (the five permanent members of the United Nations Security Council plus Germany) reached a sought-after agreement in July on curbing Tehran's nuclear program temporarily in exchange for an end to financial and trade embargos.
According to reports by the Iranian media, a Japanese oil tanker is expected to dock at Kharg Oil Terminal on Tuesday, which would make it the first foreign tanker to load crude from an Iranian terminal in the Persian Gulf after sanctions were lifted on Jan. 16.
Japan's Parliament approved government guarantees on insurance for crude oil cargos from Iran a week after the nuclear accord was reached. The law paved the way for Tokyo to offer insurance of up to $7.6 billion for each tanker carrying Iranian crude bound for Japan.
Supply and Demand
Japan's increasing demand for heavy oil has coincided with Iran's return to the market. The country has said it wants to raise crude output by 1 million barrels within the six months of sanctions removal.
However, analysts are skeptical on whether Iran can deliver on that promise in the short run as legal uncertainties on the lifting of sanctions complicate trade transactions with the country.
Japan is raising oil imports to ensure thermal power generation, as the country is grappling with electricity shortages caused by the shutdown of its tsunami-crippled Fukushima nuclear plant in northeastern Japan.
Within days of the implementation of Iran's nuclear deal, the Japanese government lifted its key sanctions against Iran, paving the way for boosting energy ties with the Persian Gulf state.
The move allows Japanese firms to make investment or undertake oil and gas projects in Iran without fear of violating sanctions.
In November, Japanese refiner Cosmo Oil said it was weighing up the possibility of buying more crude from Iran once sanctions were lifted.
Cosmo Oil is one of the major Japanese importers of Iran's oil, which is likely to renew or improve its annual oil contract with Iran for April 2016-March 2017.
Tehran is also fast-tracking oil deals with European countries. Iranian and Greek oil officials signed a deal to resume oil exports to Hellenic Petroleum, Greece's biggest oil refiner, in a meeting in Athens on Friday.
The deal would make the refiner the first in Europe to restart trade relations with Iran in the post-sanctions era.
Hellenic Petroleum was a major buyer of Iranian crude, importing around 120,000 barrels a day of crude from Iran in 2011, or nearly 20% of the Southeast European country's annual crude oil imports in the post-sanctions period.
Iran used to sell as much as 800,000 barrels per day to European refiners in Italy, Spain and Greece before the sanctions over its nuclear program were imposed.
