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Thu 26 Feb 2009 12:24 PM

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Abu Dhabi deepens April crude supply cuts to Asia

UAE's move signals oil cartel OPEC could cut production further at its March meeting.

OPEC member UAE deepened its curbs on crude oil supply to Asia in April, surprising traders and a possible signal that the oil cartel could cut production further at its March meeting.OPEC members have been trimming supply to refiners in line with agreed output cuts, but this has not been enough to stop oil prices sliding by over $100 a barrel since a peak in the middle of last year.

Various cartel members have signalled that further cuts could be agreed at the group's next meeting in March.

In a statement on Thursday, Abu Dhabi National Oil Co (ADNOC), the main supplier for the UAE, said it will supply its customers less of its flagship Murban crude and three other main grades in April than it did in March.

The move came as a surprise to traders, who had expected the UAE to keep April supply curbs largely unchanged from March.

The state oil firm ADNOC said it will supply 15 percent below contracted volumes of middle-distillate rich Murban in April, compared with a 10 percent cut in March.

Supplies of Lower Zakum and Umm Shaif crudes will be cut by 15 percent in April versus a 10 percent cut in March, while Upper Zakum will be cut by 17 percent versus a 15 percent cut in March.

"For Murban, the supplies had been cut by 15 percent (in February), so the cut was within expectations," said a trader with a North Asia-based refiner.

"Upper Zakum's 17 percent cut, however, was a surprise. Lower Zakum and Umm Shaif's 15 percent were also the biggest cuts since November and are larger than expected. This will also have an impact to our spot crude purchase plans."

Abu Dhabi has been cutting crude supplies to Asia since November last year, in line with agreements by the Organization of the Petroleum Exporting Countries (OPEC) to cut production as a means to support oil prices that have plunged more than $100 a barrel since July.

ADNOC also said it will continue to keep shipping limits on exports in place for April, depriving buyers of the option to load an additional 5 percent above contracted volumes on each cargo, a standard industry practice known as "operational tolerance".

Since September the cartel has decided to lower supply by a total of 4.2 million bpd, about five percent of daily world demand, and several OPEC members have signalled that the group may reduce production further when it meets again next month to decide oil output policy. (Reuters)

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