UAE leads way in implementing latest OPEC cut

FIRST CUT: The UAE became the first OPEC member to implement cuts agreed at a meeting earlier in December. (Getty Images)

The UAE became the first OPEC member to announce deeper oil supply curbs after the cartel's biggest ever output cut last week.

It told refiners on Thursday it would reduce all loading volumes of its main export grades.

In a statement to customers and media including Reuters, the Abu Dhabi National Oil Co (ADNOC) said it will require lifters to load all cargoes of its flaship Murban crude at 5 percent below their full contract volumes, on top of the 15 percent cut in monthly supply allocations it first imposed a month ago.

It will ease supply curbs on its Upper Zakum grade next month to 3 percent from 5 percent in December, but will also limit all shipments to 5 percent below normal volumes, using an industry practice called "operational tolerance" that normally allows customers to load as much as 10 percent more crude on each ship.

"Murban and Upper Zakum Cargoes will be treated at max -5 percent tolerance loading basis," ADNOC said.

One customer confirmed the cut in tolerance, but several other customers said they understood that ADNOC was simply eliminating the option to load 5 percent above contractual volumes.

ADNOC officials could not immediately be reached to clarify the exact terms of the cuts, but lifters agreed the limits on tolerance amounted to a substantial production cut on top of the cuts ADNOC imposed from the start of December.

The ADNOC statement did not mention its Umm Shaiff or Lower Zakum grades, shipments of which had been cut by 5 and 10 percent in December.

Oil traders have been watching closely for signs of OPEC members implementing their agreed 2.2 million barrel per day (bpd) production cut agreed on Dec. 17, their third cut since September in a increasingly urgent bid to halt oil's deep slide.

While top exporter Saudi Arabia pre-empted OPEC's decision by telling customers in early December it would curtail supplies even further next month in order to stem the over $100 slide in oil prices since July, other members have been slower to take clear action, raising concerns about the group's compliance.

Confusingly, ADNOC had told Asian lifters at the beginning of December it would increase term crude oil supplies to Asia to fully contracted volumes in January, but many refiners had expected cuts after last week's OPEC decision.

After the news of the cuts for January, spot differentials for February-loading Murban crude strengthened to a premium of over 10 cents a barrel to ADNOC from flat to less than 10 cents, traders said.

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

The Big Picture
Posted by Tray on Thursday 25 December 2008 at 15:13 UAE time


We seriously need to get on with becoming energy independent. Utilizing alternative energy sources would not only lessen our dependence on foreign oil it would create cheap, clean energy, as well as create millions of badly needed new green collar jobs. This past year the high cost of fuel seriously damaged our economy and society. It destroyed every imaginable budget from national to state to the local school. While some are foolish enough to be doing the happy dance around the lower prices at the pumps they are totally missing out on the news that OPEC is planning to cut production and raise the price per barrel back up to between 75-100 bucks again. I just read Jeff Wilson's new book The Manhattan Project of 2009 Energy Independence Now. you can see it @ www.themanhattanprojectof2009.com It would cost the equivalent of 60 cents per gallon to charge and drive an electric vehicle. The electricity to charge the vehicle could come partially or totally from electricity generated by wind or solar. One of the most fascinating facts in the book is that ...If all gasoline cars, trucks, and suv’s instead had plug-in electric drive trains, the amount of electricity needed to replace gasoline is about equal to the estimated wind energy potential of the state of North Dakota. Why don't we use some of the billions in bail out money to bail us out of our dependence on foreign oil? We must move forward as nation towards energy independence. Oil is finite, it will run out one day in the not too distant future.

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM