In a sign that Saudi Arabia plans to initially comply with OPEC’s production cuts, state-run Saudi Aramco is discussing with customers the possibility to cut its February crude loadings by between 3 percent and 7 percent, Reuters reported on Thursday, citing four sources in the know.
In OPEC’s deal from November, the cartel’s de facto leader and biggest producer Saudi Arabia pledged to cut 486,000 bpd, lowering production to 10.058 million bpd.
“Aramco is approaching all its customers for possible cuts from February and discussing likely (supply) scenarios,” Reuters quoted one of the sources as saying. The scenarios vary between cuts of 3 percent and 7 percent, the source noted.
Aramco’s cuts in February deliveries would vary among customers and across various Saudi grades.
The state oil company would get nominations for February loadings from its customers and is looking into which grades it could cut from, another source told Reuters.
By early next week, on January 10, Saudi oil buyers will be notified of their allocations for next month.
Earlier this week, media in the Middle East reported that OPEC member Kuwait had cut output by 130,000 bpd to about 2.75 million bpd, while non-OPEC Oman was said to cut 45,000 bpd from 1.01 million bpd.
Kuwait had pledged 131,000 bpd cut in the OPEC deal while Oman has indicated several times that those 45,000 bpd was the amount it intended to cut.
Venezuela has also said that it would start reducing supply by 95,000 bpd beginning January 1st, complying with its commitment to the total cartel cuts.
On Thursday, Iraq announced it had begun reducing production, though no figures were released.
"Iraq reaffirms its commitment to the decision by OPEC, which was adopted at the last meeting in Vienna by putting in place a deliberate plan to reduce output from the country's fields with the beginning of the New Year, and that Iraq is dealing wisely with this issue", Luaibi said in a statement on the oil ministry website, Platts reported. Related: 2017 – A Quiet Year For Oil?
S&P Global Platts estimates Iraq produced at an average of around 4.6 million barrels per day in December, up 50,000 from November.
Given OPEC’s poor track record of sticking to promises, analysts are not very optimistic that all cartel members and all 11 non-OPEC producers that had committed to cuts would fully comply this time either.
Still, some expect compliance will be high, like Goldman Sachs, for example, which sees compliance at 84 percent. Energy Aspects oil analyst Virendra Chauhan told CNBC that he expected compliance at 80 percent and that Russia would stand by its promised cut. Alex Dryden, global market strategist at JP Morgan, also sees compliance at around 80 percent, he has told CNBC.
By Tsvetana Paraskova for Oilprice.com
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