Japan Narrows the Hormuz Supply Gap but LNG Costs Reshape Its Power Mix
Japan's alternative crude procurement has rebounded to 80% of normal, but LNG prices above $16 per MMBtu are pushing the country toward coal.
Japan's crude imports from the Middle East fell 63.7% year-on-year in April 2026 and 57.2% in May 2026, Japan NRG reported Monday (2026-07-27), quantifying the scale of a supply shock that followed the closure of the Strait of Hormuz.4
Japan sources about 94% of its crude from the Middle East, with almost all of it transiting the strait. Losing those flows removed supply from nearly the entire import base simultaneously.4
The recovery has been faster than initially feared. METI data showed alternative procurement reaching roughly 65% of normal in May 2026 and 80% in June 2026, with officials projecting a return to 100% by July 2026. Domestic refinery crude runs were still down 13.7% year-on-year in April 2026, partly because operators reduced throughput to avoid equipment problems from handling unfamiliar crude grades sourced through new supply channels.4
Domestic fuel sales held up despite the supply gap. METI figures placed consumption at 97.9% of 2025 volumes in April 2026 and 99.7% in May 2026, an outcome supported by Japan's strategic reserves, which totalled around 203 days of combined public and private stock as of early June 2026.4,1
The crude pivot is visible in export data. U.S. crude shipments to Japan reached 800,000 barrels per day in May 2026, more than three times the pre-crisis level, according to Japan NRG data published June 8, 2026. EIA figures showed U.S. petroleum exports rising 15% in April 2026 versus March 2026, with crude averaging 5.6 million barrels per day for the month, 21% above the previous record set in December 2023.1,3
The expectation of restored Hormuz flows stalled in the week of July 13, 2026, when fresh U.S.-Iran tensions sent Asian buyers back to negotiating spot U.S. crude cargoes, oilprice.com reported. ICE Brent crude front-month was at $90.87 per barrel on Monday morning (2026-07-27).3
Gas is where the cost pressure is most acute. Japan cut gas-fired power generation in June 2026 to 17.3 TWh, down 16% year-on-year, as JKM Asian LNG prices held above $16 per MMBtu, making coal the cheaper dispatch option with Asian coal trading around $130 per tonne, according to data published July 3, 2026. JKM was at $22.00 per MMBtu on Monday (2026-07-27).2
LPG adds a residential dimension. Japan imports roughly 85% of its LP gas from the United States, Canada, and Australia, and LP gas accounts for about 4% of Japan's total final energy consumption and 10% of household energy use. With import costs rising, Tokyo added ¥100 billion to the FY2026 supplementary budget to cushion the impact on consumers.4
Canada announced it would build a new oil pipeline connecting Alberta to the Pacific coast, with 1 million barrels per day of capacity and construction expected to start as early as September 2026. A new Pacific export route for Canadian crude would benefit Asian importers over the longer run. But construction will not begin before September 2026 at the earliest, and the near-term procurement math is unaffected.2
UAE tanker data offered a more immediate read. Oil exports from the United Arab Emirates jumped to more than 3.9 million barrels per day in June 2026, just short of the highest level on record, as Persian Gulf output gradually came back online, tanker-tracking data showed in early July 2026.2
METI's projection that alternative crude procurement will reach 100% in July 2026 is the benchmark to verify in coming weeks. June's 80% recovery marked a meaningful step from May's 65%, and full replacement would allow refiners to rebuild throughput. But with JKM holding at $22.00 per MMBtu on Monday (2026-07-27), Japan's LNG import bill continues to weigh on power sector economics even as the crude side stabilises.4