Complex Made Simple

UAE’s ADNOC to cut January crude supplies to Asia as part of OPEC deal

*  ADNOC Cuts Murban, Upper Zakum supplies by five per cent

* Das supplies to fall by three per cent

* Refiners to use Saudi, Iraqi oil to replace Abu Dhabi supplies

* Kuwait says to implement its share of the reduction 


Abu Dhabi National Oil Company (ADNOC) on Tuesday said it would cut crude supplies by 3-5 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.


(DNOC to almost triple petrochemical output by 2025)

No large impact

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 it would reduce Murban and Upper Zakum crude supplies by 5 per cent and would cut Das crude exports by 3 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 said.

Separately, Kuwait Petroleum Corp (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.


(Three-in-one: another ADNOC consolidation is on the way)


Hit to Asia

ADNOC’s supply cuts will mostly hit Asia although they remain within operational tolerance limits of 5 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 3.1 million bpd in November, according to a Reuters survey. The producer’s flagship crude is light sour Murban with an API gravity of about 40 degrees and its production is about 1.6 million bpd.


(Why is ADNOC consolidating offshore oil firms?)


Besides state-controlled ADNOC, France’s Total, South Korea’s GS Energy and Korea National Oil Corporation (KNOC) and the Japan Oil Development Company (Jodco) are partners in producing onshore crude. Key Murban crude buyers are in Japan, South Korea, New Zealand and Thailand.

The UAE’s main offshore oils are Upper Zakum and Das crude.

Upper Zakum, owned to 28 per cent by U.S. oil major ExxonMobil, and 12 per cent Jodco, is a medium grade crude.

Das, a blend from the Umm Shaif and Lower Zakum oilfields, is a relatively light crude grade. Beyond ADNOC’s 60 per cent share, Britain’s BP, France’s Total and Japan’s Jodco are also partners in producing Das crude.