Japan will slash its crude purchases from Iran by almost 80 per cent in April compared to the first two months of the year as buyers comply with Western sanctions, trade sources said.     

The cuts, amounting to 250,000 barrels per day, are the steepest yet by the four Asian nations who buy most of Iran's 2.2 million bpd of exports, as tightening sanctions make it tough to pay, ship and insure the oil.     

The United States and Europe are trying to squeeze the revenues Iran makes from its 2.6 million bpd oil exports to force it to halt a nuclear programme they fear will be used to make weapons but which Tehran says is for power generation.     

Japanese buyers will load just 75,000 barrels per day (bpd) of oil in April, trade sources said, a drop of 77 per cent from the average imports of 322,900 bpd in the first two months of the year. Customs data is not yet available for March imports.     

The sources declined to be identified because they are not authorised to talk to the media.          

Japan's biggest buyers of Iranian oil, Showa Shell Sekiyu KK and JX Nippon Oil & Energy Corporation, are likely to load four cargoes amounting to 2.25 million barrels in April, the sources said, with shipments arriving this month and next.

Both companies declined to comment.      

EU measures ban Europe's insurers, the providers of around 90 per cent of the world's tanker insurance, from providing cover to Iranian oil exports anywhere in the world, and Japanese insurers have also imposed their own shipping restrictions.           

Last year, at least 10 tankers a month called at Iranian ports to lift oil for Japan. In April, three or four tankers are expected to load, traders said.     

Japan and South Korea have lobbied for exemptions to allow them to continue shipping reduced volumes of crude, but insurance and shipping executives say a complete ban now looks likely.      

The threat of a cut in Iranian supplies drove oil prices in March to $128 a barrel, their highest level since 2008. Investment bank JP Morgan estimated Iran's output may fall 1 million bpd by the end of June as refiners cut imports.       

In the second half of 2011, Japan cut between 15 and 22 per cent of its oil imports from Iran, which was enough for the United States to grant it a waiver from sanctions. Refiners and traders have continued to cut their annual contracts.     

Sources said top importer Showa Shell had reduced the volume of oil it will import from Iran under an annual deal the company renewed in April. One source said the cuts may range between 15 per cent to 20 per cent from last year's 100,000 bpd contract, but exact details were not available.      

JX Nippon Oil & Energy Corporation, Japan's biggest oil refiner, has not renewed a contract to buy 10,000 barrels per day (bpd) of Iranian crude, which expired in March. JX has another contract for 80,000 bpd of crude from Iran, which was renewed in January. 

The Japanese crude buyers succeeded in convincing Iran to widen the force majeure clause in the annual contracts to include sanctions. The clause is usually limited to exempting buyers and sellers from liability due to fires, accidents and natural calamities.     

"The main issue was getting Iran to agree to the additional force majeure clause," a trader with a North Asian refiner said.     

China, Japan and South Korea have together cut imports from Iran by 22 per cent, or 279,000 barrels per day (bpd), to 940,000 bpd, in the first two months of the year from a year earlier, according to data compiled by Reuters. – Reuters