Abu Dhabi raises March term crude supplies to Asia

By Staff
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TOKYO/SEOUL, Jan 29 (Reuters) Abu Dhabi will restore full term crude supplies to Asian refiners for March, reversing a reduction for February and bringing under renewed scrutiny OPEC's compliance to pledged cuts, industry sources said on Monday.

The main producer in OPEC-member United Arab Emirates (UAE) has told at least seven refiners, including three Japanese, two South Korean and two Southeast Asian companies, that it would not curb supplies for March.

''The supply will return to normal levels in March,'' an official with one refiner said.

Crude markets shrugged off the Abu Dhabi news as trade in March supplies has mostly been wrapped up, while dealers are now focusing instead on U.S. inventories and weather for direction.

The move reverses Abu Dhabi's decision to cut supplies of Lower Zakum, Umm Shaif and Upper Zakum crude for February by 3-5 percent, while leaving flagship Murban crude at full volumes.

Abu Dhabi National Oil Co. (ADNOC) was the first OPEC member to announce last month a reduction in February supplies, after supplying full contracted volumes for January.

The February cuts were in line with the cartel's decision to deepen its pledged cuts by 500,000 barrels per day (bpd) to 1.7 million bpd from Feb 1., after its first cut from Nov. 1.

However, prices have continued to fall, with U.S. crude dipping below a barrel earlier this month, the lowest since May 2005.

OPEC COMPLIANCE IN QUESTION ADNOC's decision not to extend the cuts to March brings into question OPEC's compliance to its pledge, aimed at easing high inventory levels in key consuming nations due to slow winter heating fuel demand.

Abu Dhabi crude accounts for most oil exports from the UAE, which has agreed to cut output by 143,000 bpd from Feb. 1.

Some industry data have already suggested possible rises in OPEC exports.

Late last week, shipping data released by Lloyd's Marine Intelligence Unit (LMIU) showed OPEC's exports fell by close to 1.9 million bpd from the pre-cut October average to the end of December.

London-based LMIU said OPEC shipments averaged 22.8 to 22.9 million bpd by the end of December, down from an October average, before the producer group cut output, of 24.6 million bpd.

But a report by Roy Mason of oil consultancy Oil Movements released last Thursday said shipments had fallen by 900,000 bpd at most by end December and that OPEC exports will rise 270,000 bpd in the four weeks to Feb. 10 to 24.56 million bpd.

U.S. crude futures for March delivery rose 17 cents, or 0.31 percent, at .59 a barrel by 0936 GMT, on expectations of higher heating demand due to a cold snap in the United States.

''The ADNOC supply news should be bearish, but people are now looking at U.S. weather and inventories, not OPEC compliance,'' said Tony Nunan, manager at Mitsubishi Corp.'s risk management unit in Tokyo.

''People have already given up on heating oil and will shift focus to gasoline,'' he added.

Oil prices have recovered from 20-month lows below hit earlier in January, also helped by U.S. calls for a doubling of its Strategic Petroleum Reserve.

Oil traders' focus has now shifted to Saudi Arabia's next move. The world's largest oil exporter is expected to notify customers of its March supply plans around Feb. 10, industry sources said.

Saudi Arabia deepened its February allocation cuts to Asian customers to 10-13 percent from 8-9 percent below contracted volumes for January, in line with OPEC's wider cuts.

REUTERS SBA DB2104

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