Emirati state oil company ADNOC has reduced its planned shipments of crude oil to Asia by 10-15 percent for June, Reuters has reported, citing unnamed sources familiar with the matter.
ADNOC earlier said it will curb supply to Asian buyers for May by 5 to 15 percent as part of its production control obligations under the OPEC+ deal. Also, Asian buyers still have ample supply in storage and are drawing from it while prices are high. Maintenance season in many Asian refineries is helping keep demand in check, too.
Interestingly enough, the news comes before the next OPEC+ meeting, where the extended cartel will discuss supply allocations for May. The Reuters sources expect the organization to keep production levels where they are now because of the gloomier demand outlook following the latest surge of Covid-19 infections in Europe.
The latest pandemic developments in Europe this week managed to overshadow the price impact of the Ever Given container ship that got stuck in the Suez Canal, diverting all traffic from the chokepoint. While the news of the blockage lifted oil benchmarks earlier this week, news of lockdown extensions in many parts of Europe dampened optimism quickly.
OPEC+ is meeting next week to discuss the production cuts, and the expectations are that the cartel will maintain the current production levels. However, the oil market, as one Reuters source put it, is very fragile, and surprises are possible.
Yet even if the cartel keeps the current cuts, Libya and Iran could undermine its efforts to keep prices higher. Libya has a stated ambition of lifting oil production to 1.45 million bpd by the end of the year, and Iran could boost its production by 2 million bpd if the U.S. removes sanctions on Tehran. Both countries are exempt from the OPEC+ cuts because of their political problems.
By Charles Kennedy for Oilprice.com
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