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COVID Fears Drive Oil Prices Downwards

COVID Fears Drive Oil Prices Downwards

Despite significant oil inventory declines…

OPEC Cuts Begin: UAE’s Oil Firm To Cut January Deliveries

In a first visible sign that at least some OPEC cuts are underway, Abu Dhabi National Oil Company (ADNOC) has said that it will reduce crude oil supplies, and although the move is expected to hit Asia, it is not viewed as seriously affecting the Asian market because cuts are within the tolerance limits of the contracts.

ADNOC said on Tuesday that it would cut deliveries by 3 to 5 percent for three export grades, Reuters reports, quoting a company notice to traders. The UAE company plans to cut supplies of the Murban and Upper Zakum grades by 5 percent, and the Das grade crude oil supplies by 3 percent.

“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,” ADNOC said, as quoted by Reuters.

According to traders, the cut is manageable, and Saudi Arabian and Iraqi supplies will cover ADNOC’c cuts in January.

“I think it's manageable. Many (refiners) received incremental Arab Extra Light in January to cover,” an official at a North Asian refinery told Reuters.

Under the OPEC deal from November 30, UAE pledges to cut 139,000 bpd from a reference production level of 3.013 million bpd.

Related: Rex Tillerson’s Impact On European Energy

A Reuters survey has shown that ADNOC’s output reached a record 3.1 million bpd last month.

Another supplier from the Gulf Arab states, Kuwait Petroleum Corporation (KPC), is also preparing to implement the cuts, and according to refining sources quoted by Reuters, KPC “will implement its share of the reduction, which shall take effect January 2017”.

In OPEC’s output cut deal, Kuwait is committing to cut 131,000 bpd from a reference production level of 2.838 million bpd.

Oman, a member of the Gulf Cooperation Council (GCC) but not of OPEC, was expected to notify customers today that it planned to cut production by 45,000 bpd. According to a Reuters source, Oman – which is part of the group of non-OPEC producers that agreed to a collective 558,000-bpd cut – would notify each of its customers on the specifics later.

By Tsvetana Paraskova for Oilprice.com

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