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Saudi Aramco explores Feb oil supply cuts of 3-7% to meet OPEC target

Thursday, January 5, 2017 - 23:59

[SINGAPORE] Saudi Aramco has started talks with customers globally to discuss possible cuts of 3 per cent to 7 per cent in February crude loadings to comply with Opec production cuts, four sources with knowledge of the matter said on Thursday.

The Organization of the Petroleum Exporting Countries (Opec) agreed in late November to cut production in the first half of 2017 to reduce global oversupply and prop up prices.

Under the deal, Saudi Arabia, the world's biggest oil exporter, agreed to cut output by 486,000 barrels per day (bpd), or 4.61 per cent of its October output of 10.544 million bpd. "Aramco is approaching all its customers for possible cuts from February and discussing likely (supply) scenarios," one of the sources said. "Nothing is confirmed yet," he said, adding that the scenarios were for 3 per cent to 7 per cent cuts.

Aramco did not immediately comment.

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State oil giant Aramco will be receiving nominations for February crude supplies from its customers and is assessing which grades it could cut, a second source said.

Aramco raised the official selling price (OSP) for most of the crude grades it sells to Asia and the United States, but cut prices to Europe.

The price of Arab Light crude for Asian customers rose by $0.60 a barrel compared with January to $0.15 a barrel below the Oman/Dubai average.

Traders in Asia said the price hikes were slightly more than expected, and coming on the back of supply cuts in February.

Saudi Arabia's crude output fell from a revised 10.60 million bpd in November to 10.45 million bpd in December, according to a Reuters survey of OPEC production. "Exports are down markedly from a massive November number,"said one source who tracks Saudi output. "The bottom line is December is down from November with regard to supply to market." Saudi oil buyers will be notified by Jan 10 of their respective crude allocations for February.

REUTERS

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