Soaring Shipping Costs Make Japan’s Crude Imports Costliest

Crude oil rose on Sept. 30 as the United States Oil Fund climbed 1.61% to $145.66, while soaring shipping costs added pressure to supply routes already strained by geopolitical disruption.

Freight has become part of the crude price

The United States Oil Fund is a market proxy, not a direct quotation for a barrel of crude. Its gain offers a dated snapshot of the oil market, while the underlying shipping figures explain why buyers are paying more to bring crude to refineries. Freight now represents roughly one fifth of the cost of a crude cargo, making tanker availability a central part of the delivered price.

The largest vessels, very large crude carriers, or VLCCs, can carry about 2 million barrels in one trip. They are difficult to replace on long routes: Aframax and Suezmax tankers are smaller and cannot move the same volume in a single voyage. With some Gulf and Red Sea supplies stranded, refiners are reaching farther away. Indian buyers, for example, have sought cargoes from Guyana and Brazil, committing ships to voyages lasting 30 to 40 days.

Longer journeys keep each tanker occupied for more time, reducing the number available for other cargoes. The strain is compounded around the Strait of Hormuz. About 60 vessels are carrying crude through the passage to the Gulf of Oman, where cargo is transferred between ships before continuing onward. VLCCs waiting for those transfers can spend around 10 days in queues. The delay ties up scarce capacity even before the main voyage begins.

For crude leaving the Gulf, that initial passage is unusually expensive. A shuttle to Fujairah or Sohar adds about $15 to $20 per barrel, or roughly $20 million for a full VLCC. Reported charges for moving Saudi crude through the strait to a transfer point in the Gulf of Oman have reached $16 to $20 per barrel. Those rates reflect the risks faced by shipowners and crews. Some operators will not make the crossing, while others demand exceptionally high compensation.

VLCC earnings on the Middle East to Asia route have topped $1.2 million per day, compared with about $150,000 in February. Rates from the Middle East to China have doubled since summer ended. These are not minor additions for buyers: higher freight costs are carried through to the price paid for crude delivered thousands of miles away.

Soaring shipping costs reshape Japan’s supply options

Japan is particularly exposed because it sits far from many of the suppliers now able to deliver crude. A VLCC trip from the US Gulf Coast to Japan costs about $53 million as a lump sum, equal to roughly $26 to $28 per barrel. The long route is already part of Tokyo’s effort to replace barrels that once arrived through the Strait of Hormuz.

Since the conflict between the United States and Iran began and Hormuz closed in March, the United States has become Japan’s biggest crude supplier. Japan imported 860,000 barrels per day from the United States in August, representing 35% of its total imports of 2.45 million barrels per day. In February, US supply was just 65,000 barrels per day. Those cargoes travel around the Cape of Good Hope, with a typical voyage lasting 50 days.

Saudi Arabia and the United Arab Emirates remain Japan’s second and third largest suppliers, but their combined share has fallen to about 50% since the conflict began. Before March, the two countries supplied 80% to 90% of Japan’s crude. In 2025, Saudi Arabia averaged 1 million barrels per day and the UAE averaged 800,000 barrels per day.

Japanese buyers have also arranged Saudi cargoes loaded at Yanbu and routed through the Suez Canal, then around the Cape of Good Hope. Including time spent waiting for ship to ship loading, the journey takes about 60 to 65 days. The altered routes keep oil moving, but they place more ships out of circulation and make each delivery slower and more costly.

Reserve rebuilding adds another buyer to the market

Japan’s need for crude goes beyond daily refinery demand. The government is also trying to restore stocks drawn down during the disruption, which puts public purchasing into competition with refiners and other importing countries.

When the crisis began, government owned crude reserves stood at 263 million barrels, equal to 103 days of cover. Japan announced an initial release of about 80 million barrels from public and private stocks in March. In July, it made a further 20 days of supply available, or about 36.5 million barrels. There were no releases in August or September, and the government said some of the offered volumes had not been used. By the end of July, government owned reserves were about 182 million barrels.

In August, a committee at Japan’s Ministry of Economy, Trade and Industry approved a plan to rebuild public reserves to about 90 days of cover. The fiscal 2027 target implies that Tokyo needs to buy back roughly 48 million barrels. That is a sizeable requirement in a market where voyage costs are elevated and replacement supplies take weeks to arrive.

State energy agency Jogmec has begun the process with a purchase of Murban crude for delivery to its Shibushi storage base in southwestern Japan. The tender was issued on August 28, and the 2 million barrel cargo is scheduled to arrive between October 15 and December 14. It was priced at a $20 per barrel premium to Murban’s official selling price, with freight, demurrage and insurance included.

US export supply faces a tighter reserve cushion

Japan’s growing reliance on American crude comes as the United States has less room to support exports with releases from its Strategic Petroleum Reserve. Those releases have supplied domestic refineries with medium sour crude, helping them produce middle distillates such as diesel while leaving more West Texas Intermediate available to overseas buyers.

The reserve held 285 million barrels in mid September, down from 415 million in February. Federal law sets a minimum of 252.4 million barrels, leaving a narrower margin for additional withdrawals. Releases ran at 1.1 million to 1.2 million barrels per day from April through June. The rate has since fallen gradually and recently reached about 60,000 barrels per day.

The reduction of roughly 1 million barrels per day in additional reserve supply means domestic refiners must find other sources, including crude that might otherwise have been exported. Even if the administration chose to release more oil, the withdrawal pace reached in May and June would be difficult to repeat because underground storage facilities have lost pressure.

US crude exports fell from 5.6 million barrels per day in March and April to 3.7 million in August. Japan is not the only Asian buyer seeking those barrels. August loadings included about 320,000 barrels per day for Japan and 360,000 for South Korea, while Europe received a much larger 2 million barrels per day.

The supplied market data records the United States Oil Fund’s daily move, but it does not include crude production figures or a dollar index reading. It therefore cannot establish whether production changes or currency moves contributed to the day’s gain. The physical evidence here points instead to disrupted routes, reduced tanker availability, reserve rebuilding and competition for export cargoes as the clearest pressures on delivered crude costs.

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