Cosmo Oil Company, Japan's fourth-biggest refiner, will cut its 2010 term contracted volumes of crude oil with National Iranian Oil Company (NIOC), industry sources said on Thursday, amid a slash in oil demand.

Cosmo Oil, which has a contract for around 50,000 barrels per day (bpd) of Iranian crudes for this year, will cut its term crude supplies by about 10 per cent for its new contract that starts in April, one of the sources said on the condition of anonymity because the information is not public.

A company spokesman was not immediately available for comment.

The move comes after Cosmo Oil announced earlier in February a reduction of 80,000 bpd in its overall refining capacity, joining several Japanese refiners in their efforts to tighten the Japanese refined product market place.

Oil demand has been steadily falling for several years in Japan as the country's population ages and manufacturers move operations abroad, but the pace of decline has increased recently as Japan steps up its efforts to use less and cleaner energy.

Last year, oil product sales fell at their swiftest pace in 27 years and consumption in December hit a 24-year low for the month, capping a year in which a recession and diversification towards other fuel sources battered demand.

The demand destruction has raised expectations that oil refiners in the world's third-largest oil consumer nation will cut volumes from Middle East producers as their contracts for 2010 term crude supplies come up for renewal.

Late last year, Seibu Oil Co, a Showa Shell Sekiyu KK group company, cut its 2010 term contracted volumes of crude oil with Kuwait Petroleum Corp by 75 per cent to 10,000 barrels per day.-Reuters