SINGAPORE Dec 19 OPEC's efforts to hold market
share in Asia by keeping its customers, which take about
two-thirds of its exports, supplied amid wider output cuts could
prolong the global fuel glut and frustrate its attempt to
Saudi Arabia, the de-facto leader of the Organization of the
Petroleum Exporting Countries (OPEC), will target its supply
cuts at refiners in the United States and Europe rather than
Asia. Ally Kuwait is following a similar strategy, and OPEC's
second-largest producer Iraq is even raising exports to Asia.
"U.S. and European refiners are having January allocations
cut from Saudi Arabia, Kuwait and the UAE (United Arab
Emirates)," Morgan Stanley said on Monday in a note to clients.
This comes as refiners from Japan, China and South Korea
have told Reuters they have not received reduction notices from
most Middle East suppliers except for slight restrictions from
Abu Dhabi that are within contractual limits.
The producers fear that their self-imposed cuts starting in
2017 would allow U.S. oil companies to sneak in and grab market
Yet shielding Asia could undermine OPEC's strategy to eat
into the world's bloated stockpiles through supply reductions as
Asia also sits on enormous fuel stocks, likely weighing on
prices through 2017.
"It may take some time for crude supplies to tighten in
Asia, which I expect around the second half of 2017," said Eng
Hian, head of trading at AgriTrade Energy in Singapore, which
owns three supertankers. "Consider the existing supply
Targeting the United States, OPEC is hoping that producers
there will keep more of their own production at home to meet
demand, instead of exporting to Asia, said Virendra Chauhan, oil
analyst at Energy Aspects in Singapore.
Asian refiners have said they plan to buy oil from
alternative sources, including the U.S., if OPEC cuts, and BP
and Sinopec have already started bringing U.S.
oil to Asian refiners.
Even Russia, which led a group of non-OPEC oil producers to
join a cut of up to 1.8 million barrels per day (bpd) of supply,
is showing few signs of reducing exports.
Russia this year over overtook Saudi Arabia as China's
biggest oil supplier because of its pipeline connections.
Export schedules signed off by the energy ministry and seen
by Reuters showed Russia plans to increase crude exports and
transit across its territory by 200,000 bpd in the first quarter
of next year.
OIL STILL HELD ON TANKERS
Even as oil flows to Asia look likely to continue, the
region still sits on millions of barrels of unsold crude and
Shipping data in Thomson Reuters Eikon shows that between 26
and 30 million barrels of crude or fuel oil are sitting on
around 20 supertankers just off of Singapore and southern
Malaysia's Johor state.
Onshore, Asia is sitting on ample inventories as well.
China's implied stockpile build up from March to October has
averaged 740,000 barrels per day, based on monthly data from the
General Administration of Customs and National Statistics
Bureau, a higher increase than in the previous two years of the
China's commercial crude stockpile sat 239.8 million barrels
in October, with South Korea at 35.3 million barrels for the
same month. The latest figures from Japan show them holding 91.2
million barrels. That compares with U.S. crude inventories at
483 million barrels.
Jonathan Chan of Singapore-based brokerage Phillip Futures
said there was still an excess of 1 billion barrels of oil
sitting in tanks globally.
"For prices to go up further decisively, these inventories
will first have to be clear out," he said.
(Reporting by Henning Gloystein; Additional reporting by
Florence Tan, Roslan Khasawneh, Jane Chung, Osamu Tsukimori and
Keith Wallis; Writing by Henning Gloystein; Editing by Christian