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. Last Updated: 07/27/2016

Aramco Raises Japan Oil Stake

TOKYO -- Saudi Arabia's state oil company, Aramco, has raised its stake in Japanese oil refiner Showa Shell Sekiyu, part of a move to increase its market share in the world's second-biggest oil importer.

Showa Shell said in a statement on Tuesday that Aramco had bought an additional 5 percent from Royal Dutch/Shell, bringing its holding to 14.96 percent.

The extra stake is part of a deal last year under which Aramco bought an initial 9.96 percent of Showa Shell with an option for the further 5 percent.

Financial terms were not disclosed, but the 5 percent stake would be worth 21.3 billion yen ($194.8 million) based on Showa Shell's closing share price on Tuesday. After the transaction, Royal Dutch/Shell's holding in Showa Shell will drop to 35.04 percent.

With the initial deal last year, Saudi Arabia replaced the United Arab Emirates as Japan's top crude oil supplier. Aramco nearly doubled its supply to Showa Shell to about 300,000 barrels per day.

Saudi Arabia supplies about the same volume of crude to Japan's biggest refiner, Nippon Oil, which accounts for about a quarter of Japan's refining capacity of 4.76 million bpd.

In April, Saudi Arabia supplied Japan with about 1.09 million bpd of crude oil, or around 28 percent of Japan's total crude oil imports of 3.84 million bpd, according to the Economy, Trade and Industry Ministry.

Japan is the world's second-biggest oil importer and the third-biggest consumer, after the United States and China.

Showa Shell, Japan's sixth-biggest refiner, has a market value of about $3.9 billion. Its group refineries have total oil-processing capacity of 515,000 bpd.

The arrangement with Aramco provides security of supply for the bulk of Showa Shell's refining needs.

Increasing crude oil purchases from Saudi Arabia also helps Showa Shell to cut shipping costs as the company gets a single place to load a large quantity of oil, rather than having to arrange different tankers from various oil producers.

Showa Shell shares closed down 14 yen, or 1.22 percent, at 1,135 yen on Tuesday.

 Crude prices eased off their record highs on Tuesday, but stayed close to the $60 threshold on persistent global supply fears as the market once more brushed aside another OPEC pledge to add barrels, The Associated Press reported.

Traders were also watching the U.S. Energy Department petroleum data snapshot, to be released Wednesday, for consumption clues out of Washington and a threatened strike in Norway that could knock 1 million barrels off the supply chain from the world's No. 3 exporter.

"With worries about OPEC's limited spare capacity, it doesn't really matter whether we see problems emerging in Nigeria or Norway," said Orrin Middleton, an energy analyst at Barclays Capital in London. "Even the slightest fear will keep the bear out of the market."

"What seems to preoccupy people most is at what stage prices will break the $60 threshold," Middleton said.