Japan seeks new sources of oil

Japan fears steep price rises if war breaks out

Japan's biggest oil refiner, Nippon Oil, has made its first purchase of crude oil from Russia to reduce its dependence on Middle East oil as fears grow of a war between the United States and Iraq.

A spokesman for Nippon Oil said: "We wish to diversify our sources of crude, but not at the expense of ignoring economic viability."

Japan, the world's second biggest economy, imports 80% of its oil from the Middle East.

The Russian deal is believed to be the first time in almost a quarter of a century that a Japanese firm has bought oil from Russia.

War premium

Fears of a Middle East war have helped push up the price of oil by more than 40% so far this year.

Prices have fluctuated sharply as traders have been looking to US leaders' speeches and developments in the United Nations for clues.

Nippon Oil's spokesman declined to say what price the firm had agreed to pay for the shipment of two million barrels of Urals grade oil from Western Russia.

He said the purchase, from a major Western oil firm, was a one-off spot deal and not part of a continuing contract.

More such purchases were possible if the price was acceptable, he said.

Looking further away

Japanese oil firms have also been doing one-off, spot market deals in West Africa, buying oil in order to diversify their supplies.

Purchases from both Russia and West Africa can be costly to transport to the Asia Pacific region.

This has limited such trades.

Russian crude oil is mostly shipped to European markets and the Mediterranean. Some Russian crude is exported to the United States.

Leaders of oil producers' cartel Opec have also curbed output in order to squeeze prices upwards.

The price of the industry's benchmark Brent crude was $28.04 a barrel in London on Friday, Opec's news agency said.

Opec leaders have promised to increase production if oil prices breach $28 a barrel for 20 days in a row, based on a the price of a basket of oils.