MOSCOW (MRC) -- State-owned Abu Dhabi National Oil Company (ADNOC) on Tuesday said it would cut crude supplies by 3-5% across its three export grades to meet commitments under an OPEC deal to curb output, reported Reuters.
The move is one of the first visible indicators that oil markets could be physically tighter in 2017 as the Organization of the Petroleum Exporting Countries (OPEC) and other producers cut production to ease a supply glut and prop up prices.
Still, ADNOC's cut is unlikely to have a large impact on the market as it is within operational tolerance limits, while some buyers have extra oil from Saudi Arabia and Iraq to replace lost Abu Dhabi supplies, traders said.
"I think it's manageable. Many (refiners) received incremental Arab Extra Light in January to cover," said a North Asian refinery official, speaking on condition of anonymity.
In a notice to term lifters, ADNOC said it would reduce Murban and Upper Zakum crude supplies by 5% and cut Das crude exports by 3%.
"In line with OPEC's latest decision to cut production, we regret to advise you that crude oil allocation for the month of January 2017 will be reduced," ADNOC said.
Kuwait Petroleum Corp (KPC) has also notified at least two customers in Asia it "will implement its share of the reduction, which shall take effect January 2017," refining officials said.
Non-OPEC Oman will tell customers on Tuesday that it plans to cut output by 45,000 bpd and will provide details on the reduction to each customer later, a source said.
ADNOC's supply cuts will mostly hit Asia although they remain within tolerance limits of 5%, as allowed by a contract clause that lets seller or buyer adjust loading volumes based on logistics.
ADNOC's production hit a record 3.1 MMbpd in November, according to a Reuters survey. The producer's flagship crude is light sour Murban, with production of about 1.6 MMbpd and an API gravity of about 40 degrees.
Besides state-controlled ADNOC, France's Total, South Korea's GS Energy and Korea National Oil Corporation (KNOC), and the Japan Oil Development Company (Jodco) are partners in producing onshore crude. Key Murban crude buyers are in Japan, South Korea, New Zealand and Thailand.
The UAE's main offshore crudes are Upper Zakum and Das.
Upper Zakum, owned 28% by US oil major ExxonMobil, and 12% by Jodco, is a medium grade crude.
Das, a blend from the Umm Shaif and Lower Zakum oilfields, is a relatively light crude grade. Beyond ADNOC's 60% share, Britain's BP, Total and Jodco are partners in producing Das crude.
As MRC informed earlier, ADNOC plans to almost triple its petrochemical production to an annual 11.4 MMt by 2025 from 4.5 MMt at present. ADNOC's petrochemicals are produced by Abu Dhabi Polymers Co (Borouge), which makes polyolefins, and Ruwais Fertilizer Industries (Fertil), which produces urea and ammonia fertilisers.