Abu Dhabi first with Feb OPEC oil output cuts

Tokyo, Dec 26: Abu Dhabi's state oil firm said on Tuesday itwill cut some crude sales in February by 3-5 percent, the firstindication of an OPEC member applying new output curbs.

Abu Dhabi National Oil Co. (ADNOC), the main producer in theUnited Arab Emirates, will reduce supplies of three grades that accountfor nearly half its production by 3-5 percent below contracted volumes,it said in a statement.

It had supplied customers with full contracted volumes in January,when traders said it complied with OPEC limits by reducing sales on thespot market. ADNOC did not cut sales of its Murban grade, which is morethan half its output, for February.

The cuts, if applied equally to ADNOC and to its joint-ventureforeign partners in the three fields, should amount to about 40,000barrels per day (bpd), in line with the UAE's commitment under a secondround of OPEC cuts.

''OPEC producers seem really committed to cutbacks to defend prices,'' a trader said.

News of the curbs added support to global oil prices alreadyrising on signs of chillier U.S. weather and fears over Iraniansupplies after the United Nations imposed sanctions. U.S. crude was up41 cents at .82 a barrel by 0500 GMT.

Earlier this month the Organization of the Petroleum ExportingCountries, which controls about a third of global crude exports, agreedto cut output by 500,000 bpd, or 2 percent, starting in February tohelp reduce swollen stockpiles.

Those cuts, deferred until after the peak of winter demand indeference to consumer nation concern, will come on top of an agreed 1.2million-bpd reduction made from Nov. 1 as OPEC moved to halt a 25percent slump in oil prices to below a barrel.

Reuters' estimates showed only about two-thirds of the previouscurbs materialised, with top oil exporter Saudi Arabia and the UAEamong the most visible in making cuts.

Traders had expected the February cuts by ADNOC, and will nowshift focus to state oil firm Saudi Aramco, which is due to inform itscustomers about February supplies in early January.

Aramco deepened supply curbs in January to about 8-9 percent belowcontractual volumes, a bigger cut than December's 4-5 percent.

Murban spared

ADNOC is taking a different approach to its new cutsthan those it imposed in November, when it cut contract sales of theistillate-rich Murban crude but left its Upper and Lower Zakum gradesundisturbed.

In its monthly supply notice for February, ADNOC told its Asianterm buyers to expect 3 percent less Upper Zakum, its second-biggestfield with output of about 550,000 bpd.

It will apply a larger 5 percent cut to exports from Lower Zakum and Umm Shaif, which amount to about 500,000 bpd combined.

But an industry source said ADNOC would not cut back on sales ofMurban, a field that pumps about 1.4-1.5 million bpd, possibly aimingto capitalise on a recovery in prices.

All told, those cuts add up to near the UAE's promised 42,000 bpd reduction under OPEC's latest deal.

On the physical crude market in Asia, where Abu Dhabi sells mostof its crude, February-lifting Abu Dhabi grade cargoes had almost soldout at sharply higher premium levels than January.

''The February market has been strong exceptionally for severalmonths,'' a trader said. ''The recovery has reflected the market'santicipation of ADNOC cuts.'' Spot Murban for February loading hastraded at up to a 40-cent premium to its official selling price, thehighest in more than a year and well up from 5- to 10-cent premiums inJanuary.

BP, Total, Exxon Mobil Corp. and Royal Dutch Shell all have sharesin Abu Dhabi oilfields, including about 40 percent of the Murban field.

Reuters