- Japan's biggest refiner battling competition amid margin drop
- Latam crude seen as alternative to traditional Mideast supply
Japan’s biggest refiner will opt for a “one cent” saving on crude purchases even if that means shipping from places other than the Middle East, a region it’s always depended on for stable supplies.
JX Nippon Oil & Energy Corp. is examining more samples of crude that have previously never been processed at its plants, according to Minoru Minegishi, a group manager at the company’s crude oil trading and shipping department. It’s becoming more price sensitive amid shrinking refining margins in Asia, with China accelerating fuel exports because of weak domestic demand.
“We now have a mindset that we should take cheaper crude even when it’s a one-cent difference,” Minegishi said. “We live in difficult times in terms of domestic and overseas competition.”
Japanese refiners, which have traditionally favored cargoes from Saudi Arabia or Abu Dhabi for stability of supply, are boosting imports from other regions including Latin America. Their shipments of Mexican oil more than doubled to 812,619 kiloliters in the first half of 2015 from a year earlier, according to the Finance Ministry. China’s fuel exports are exerting “strong downwards pressure” on Asian refinery margins, Citigroup Inc. said Aug. 10.
Tokyo-based JX agreed to buy 6 million barrels of Isthmus crude from August and January 2016, according to Mexico’s state-owned Petroleos Mexicanos. The Japanese refiner has already taken delivery of 4 million barrels over the first half of this year.
“We are more price sensitive than we were in the good old days,” Minegishi said.
The shale boom that’s driven U.S. oil production to the highest level in more than three decades has reduced America’s need for imports, displacing crude from nations such as Mexico and Venezuela as benchmark prices plunged more than 50 percent over the past year. That’s boosting cheaper South American deliveries to Asian even as the Organization of Petroleum Exporting Countries including Saudi Arabia maintain output in a bid to defend market share.