TOKYO/SEOUL: Top oil exporter Saudi Arabia will deepen crude supply curbs to Asian refiners next month to comply with Opec's second output cut, industry sources said yesterday, but the news failed to stem a sharp slide in prices.
The cuts, which came one day after European refiners said they would receive mostly steady supplies next month, were in line with refiners' expectations, and analysts said they were already looking ahead on what action Opec might take next.
State oil firm Saudi Aramco will supply two South Korean refiners with 13% less crude than stipulated under their annual contracts, its deepest cuts to Asia in nearly two years, industry sources said.
Three Japanese refiners received cuts of around 10%, while a Taiwanese refiner confirmed reductions in a similar range.
The February allocations show a further reduction in supplies versus January, when Aramco said it would supply 8-9% less than contracted volumes. That was an unexpectedly deep cut versus the 4-5% reductions it applied in December.
US crude oil futures fell by as much as 95 cents or 1.76% to touch a 19-month low for the third consecutive day, deepening losses so far this year to 13%.
A cut of some 2 percentage points in the kingdom's sales to Asia refiners, which lift about half of its 7mn barrels per day (bpd) of exports, would equate to around 70,000 bpd, about half of its pledged total reduction in output.
The monthly allocations from Opec's biggest member show it is serious about enforcing the 500,000bpd output cuts agreed by the cartel last month.
“This is part of their strict adherence to Opec's December decision,” said Ken Hasegawa, manager at International Business Department at Himawari CX in Tokyo.
Abu Dhabi, the main producer in the United Arab Emirates, informed Asian lifters two weeks ago that it would cut exports of about half its crudes by some 3-5% in February.
“What we have to focus on is whether there will be additional cuts due to the decline in crude prices,” said Hasegawa. “If prices fall below $50, Opec would have to make another cut.”
Opec's president has initiated talks with fellow oil ministers over how to brake oil's sharp slide, Opec sources said on Tuesday. But some analysts say the group may have to wait to see what effects its February cuts have before taking new steps.
Evidence is emerging that Opec's initial 1.2mn-bpd cut is having some effect, with weekly US crude oil inventories falling by 5mn barrels, their seventh consecutive draw, government data showed on Wednesday.
“From the crude oil side of today's oil data... comes the first tangible data point that Opec production cuts are eating into US imports,” said UBS analyst Jan Stuart.
But inventories in Japan, the world's third-largest consumer, have risen by about 3.2mn barrels over the past two weeks, standing sharply above last year's three-decade lows, industry data showed on Wednesday.
On Tuesday, Aramco informed European refiners it would maintain February exports to some of them unchanged from this month, although it would cut supply to at least one customer more deeply, trading sources said.
There was no indication yet of the level of Saudi supply allocations in February to customers in the US.
Industry sources said they did not expect the cuts to have a significant impact on the Asian crude market, with refiners already suffering weak margins and with stocks ample.
Japan-based sources said that supply cuts were made to the same two grades – Arab Heavy and Arab Light – as in January. – Reuters |
