Abu Dhabi National Oil Company (ADNOC) has revealed that it would cut crude supplies by up to five per cent across its three export grades to meet commitments under an OPEC deal to curb production
The move is among the first visible indicators that oil markets could be physically tighter next year as the Organisation of the Petroleum Exporting Countries (OPEC) and other producers cut output to ease a supply glut and prop up prices, Reuters reported.
Still, traders said ADNOC’s cut is unlikely to have a large impact on the market as it is within operational tolerance limits and buyers have extra oil from Saudi Arabia and Iraq to replace lost Abu Dhabi supplies.
“I think it’s manageable. Many refiners received incremental Arab Extra Light in January to cover,” said a North Asian refinery official, who spoke on the condition of anonymity.
In a notice to term lifters, ADNOC said that it would reduce Murban and Upper Zakum crude supplies by five per cent and would cut Das crude exports by three per cent.
“In line with OPEC’s latest decision to cut production, we regret to advise you that crude oil allocation for the month of January 2017 will be reduced,” the producer stated.
Separately, Kuwait Petroleum Corporation (KPC) has also notified at least one customer in Asia that it “will implement its share of the reduction, which shall take effect January 2017”, the North Asian refinery official said.
ADNOC’s supply cuts will mostly hit Asia although they remain within operational tolerance limits of five per cent. The contract clause allows either the seller or buyer to adjust actual oil loading volumes based on logistics.
ADNOC’s production hit a record 3.1mn bpd in November 2016, according to a Reuters survey. The producer’s flagship crude is light sour Murban with an API gravity of about 40º and its production is about 1.6mn bpd.