Doubts about Saudi adherence to Opec cutbacks put to rest

Singapore/London: Saudi Arabia has cut oil supply to some major customers with immediate effect, industry sources said yesterday, easing doubts about whether the world's top exporter will comply quickly with Opec (Organisation of the Petroleum Exporting Countries) curbs.

Riyadh has informed major oil companies that it will restrict the volume it can load this month by limiting operational tolerance, one of the sources familiar with Saudi crude sales said.

Operational tolerance usually allows buyers to take up to 10 per cent extra crude on top of allocated sales.

The extent of the limits on tolerance were not immediately clear, but even eliminating the 10 per cent band may only take the kingdom part way to its share of the Opec cuts agreed last month, under which Saudi Arabia is to take 466,000 bpd off the market.

No estimate provided

Another source with a major customer of state oil firm Saudi Aramco also confirmed that he saw evidence Riyadh had cut supplies in November.

Neither source was able to give an estimate on how much exports had been cut in total.

Questions about Saudi Arabia's adherence to Opec's October 24 deal to cut output by 1.5 million barrels per day (bpd), or about 5 per cent, emerged this week as Asian refiners that buy half the kingdom's crude said they had not been told of any cuts.

At least two Asian refiners, including India's BPCL (Bharat Petroleum Corporation Limited), have been notified by Aramco that their November supplies would remain unchanged despite the Opec decision, company sources said.

Oil traders expect it to make more explicit cuts when it informs customers of their allocations for December loading next week.

Qatar cuts 40,000 bpd

Qatar has cut crude oil exports to Asia by about 40,000 barrels per day (bpd) from this month in line with Opec's agreement to curb output by 5 per cent, Qatar's Energy Minister Abdullah Al Attiyah said on Tuesday.

"I instructed the marketing department to implement Opec decisions," Al Attiyah said while on a visit to the Japanese capital for meetings on economic ties.

Qatar follows other Opec members from the UAE to Iran to Nigeria in confirming that it has cut immediate shipments to comply with Opec's deal to cut production by 1.5 million barrels per day (bpd), although Saudi Arabia has yet to notify customers in Asia of curbs.

Asked whether he thought Opec might need to cut output again he said: "I don't know yet, it's very early to predict."

"Opec is not discussing the price, mainly our concern is the balance between supply and demand," he said. "All the analyses showed that there will be a lower demand of oil in the fourth quarter because of the economic crisis in the world."