Japan to release oil reserves as Middle East conflict disrupts supply
Synopsis
Japan plans to release oil from its reserves to ease supply disruptions caused by the Iran conflict and rising gasoline prices.
Japan will begin releasing oil from its strategic stockpiles on Monday to cushion the impact of supply disruptions caused by the US-Israeli war against Iran, as rising gasoline prices highlight the country's heavy dependence on Middle Eastern energy.
Key highlights
- Japan to release 80 million barrels of oil from strategic reserves
- Move aimed at offsetting supply disruptions from the Middle East conflict
- Japan relies on the Middle East for about 90% of its oil imports
- Release could form part of IEA’s coordinated 400 million barrel supply action
- Tokyo also exploring alternative supplies from the US and other regions
Japan pledges record oil release
Tokyo plans to release 80 million barrels of oil, equivalent to about 45 days of domestic supply, to stabilise the market and ensure adequate fuel availability.
The government has asked domestic refiners to use the crude from reserves to maintain stable supplies.
The move will reduce Japan’s national oil stockpiles by about 17%.
Officials have not yet clarified how much of Japan’s release will contribute to the International Energy Agency’s coordinated global release of about 400 million barrels, aimed at countering supply shocks caused by the conflict.
Strategic reserves provide temporary relief
Energy analysts say strategic reserves can help ease short-term disruptions but cannot fully offset prolonged supply shocks.
“The reserves can help stabilise supplies and prices in the short term but they mainly buy time,” said Yuriy Humber, chief executive of Tokyo-based consultancy Yuri Group.
“They can’t fully offset a prolonged disruption in the Strait of Hormuz,” he added.
Additional oil could be released
Japan may also have access to around 12 million barrels of oil jointly stored in the country by Saudi Arabia, the United Arab Emirates and Kuwait.
Any release from these joint reserves would come in addition to the announced 80 million barrels, according to Japan’s Ministry of Economy, Trade and Industry (METI).
Japan heavily reliant on Middle East oil
Japan established its national oil reserve system in 1978, several years after the Arab oil embargo highlighted the risks of energy dependence.
The country now maintains oil reserves equivalent to about 254 days of consumption.
Japan currently imports around 90% of its oil from the Middle East, making it particularly vulnerable to disruptions in the Strait of Hormuz, a critical route for global oil shipments.
Release schedule for reserves
According to METI, Japan will begin releasing 15 days’ worth of oil from private-sector reserves on Monday.
An additional one month of supply from state reserves will be released later this month.
At the same time, Japanese refiners are seeking alternative supply routes that bypass the Strait of Hormuz.
Officials are exploring additional imports from the United States, Central Asia, South America and Gulf countries.
US urges allies to buy American energy
Japan currently imports about 4% of its oil from the United States, after sharply reducing purchases from Russia following the 2022 invasion of Ukraine.
That was the last time Japan tapped its oil reserves.
US officials say the current crisis highlights the benefits of sourcing energy from stable regions.
“When you look at the conflict in the Middle East, you’re reminded that crude oil shipments from Alaska to Japan have never been successfully targeted in a terrorist attack,” said Lee Zeldin, administrator of the US Environmental Protection Agency.
“This conflict is a reminder that nations across the Indo-Pacific can look to the United States, where we have the resources,” he added.
Energy markets outlook
Energy markets will monitor how quickly Japan’s oil release reaches refiners and whether other countries follow with similar measures.
Analysts say the effectiveness of these releases will depend largely on how long shipping disruptions persist in the Strait of Hormuz.
FAQs
Q1: Why is Japan releasing oil from its reserves?
Japan is releasing oil to stabilise fuel supplies and reduce price pressures caused by disruptions linked to the Iran conflict.
Q2: How much oil will Japan release?
The government plans to release 80 million barrels, equivalent to roughly 45 days of supply.
Q3: Why is Japan vulnerable to oil supply shocks?
Japan imports around 90% of its oil from the Middle East, making disruptions in the Strait of Hormuz particularly significant.
Q4: Will other countries release oil reserves?
Yes. The International Energy Agency is coordinating a potential global release of about 400 million barrels to stabilise markets.
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