Tuesday, Dec 13, 2016

Abu Dhabi: Abu Dhabi National Oil Company (Adnoc) said on Tuesday it would slash crude supplies by 3 to 5 per cent from January, in a sign of compliance with an Opec agreement.

In a landmark deal on November 30, Opec member countries agreed to cut output by 1.2 million barrels per day to rebalance oil markets from January 1.

Countries from outside the group would also contribute by cutting production by 558,000 barrels per day from next year.

This is the first time in fifteen years that both Opec and non-Opec countries have come together to slash production to prop up oil prices.

Adnoc, the main producer and exporter of oil in the UAE said on Tuesday that it would reduce Murban and Upper Zakum crude supplies by 5 per cent and cut Das crude exports by 3 per cent, according to a report by Reuters.

In a notice to traders, Adnoc said “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.”

Apart from the UAE, key oil producers like Saudi Arabia, Qatar, Oman and Kuwait have all announced cuts and plans to inform customers about the decision.

Kuwait Petroleum Corp (KPC) has also notified at least two customers in Asia it “will implement its share of the reduction, which shall take effect January 2017”.

Non-Opec Oman is also expected to tell customers on Tuesday that it plans to cut output by 45,000 bpd and will provide details on the reduction to each customer later.

“Big Opec member countries in the Gulf region like Saudi Arabia, Kuwait, and the UAE are taking the agreement seriously and going ahead with the cuts, but doubts remain whether other producers will comply with the decision,” Tamas Varga, an oil analyst from London Based PVM Oil Associates told Gulf News over phone.

He also said there were doubts Russia would stick to the deal as it has promised to slash output from May.

“We have to wait and watch how long this goodwill among oil producers is going to last on oil reduction,” he said

Opec countries have been pumping at record levels in recent times with Saudi Arabia’s production reaching 10.72 million barrels of oil per day last month and the UAE’s output levels at about 3.1 million barrels per day.

With most of the Gulf oil producers and non-Opec suppliers announcing cuts, as well as intimating customers about the reductions, oil prices saw a rally with brent going up by 56 cents to reach $56.25 (Dh206.57) a barrel at around 4.15pm UAE time on Tuesday.

US crude West Texas Intermediate was up by 0.83 per cent to touch $53.27 per barrel.

“With strict compliance from the involved countries, the oil market will rebalance sooner than previously expected,” said Ole Hansen, head of commodity strategy at Saxo Bank.

By Fareed Rahman Senior Reporter

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