Adnoc move to selectively hike supply raises a stir

Tokyo: Abu Dhabi National Oil Co (Adnoc) will increase term crude oil supplies to many major Asian customers next month, sources said on Tuesday, but traders said it seemed unlikely the UAE was reneging on its obligations to the Organisation of the Petroleum Exporting Countries (Opec).

Although the full-scale allocations appeared to reverse the blanket five to 15 per cent export cuts that Adnoc announced after Opec slashed output in late October, traders said the UAE's main producer could be making more discreet, targeted cutbacks to specific customers instead of across-the-board curbs.

Surprising

"It's a little bit surprising," said a source at one of Adnoc's customers, which was told by fax it would receive 100 per cent of its contractual supplies of flagship Murban crude in January after its shipments were cut by 15 per cent this month.

In total, five sources at Japanese and South Korean refiners and trading houses confirmed that Adnoc had reversed the cuts it so publicly announced last month, although one large customer said it would not be lifting any Adnoc crude at all next month.

Opec on Saturday delayed a decision on a new oil supply cut until mid-December in order to give two previous cuts totalling two million barrels per day (bpd) more time to work.

Saudi Arabia and its Gulf allies - including the UAE - also demanded tighter adherence to past restraints amid worries that price hawks like Iran and Venezuela may not be pulling their weight, threatening a repeat of the divisions that have hindered Opec's effectiveness in dealing with past downturns.

Given that political backdrop, traders were more inclined to search hard for less-obvious signs of Adnoc cuts than to suggest the UAE was turning back on its promises. "Abu Dhabi seems to be selling crude in the spot market, so they may cut the sales there," one of the lifters said.

After Opec's deal in late October to cut 1.5 million bpd effective from November 1, the deepest one-off cut in nearly seven years, Adnoc was quick to announce an immediate reduction in its Upper Zakum field for November followed by deeper cuts to Murban and Lower Zakum streams in December, making its Opec compliance public.

Some traders suggested that weakening oil demand - rather than explicit cuts - may be helping the UAE meet its commitment to remove 134,000 bpd, or about five per cent of its production, under Opec's November 1 deal.