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Saudi Aramco explores Feb oil supply cuts of 3-7 percent to meet OPEC target
January 5, 2017 / 10:35 AM / a year ago

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

REUTERS - Saudi Aramco has started talks with customers globally to discuss possible cuts of 3 percent to 7 percent in February crude loadings as it moves to implement an agreement on curbing global oil output, sources said on Thursday.

An oil tank is seen at the Saudi Aramco headquarters during a media tour at Damam city November 11, 2007. REUTERS/ Ali Jarekji/Files

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

“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 percent to 7 percent cuts.

Aramco did not immediately comment.

Under the deal, Saudi Arabia agreed to cut output by 486,000 barrels per day (bpd), or 4.61 percent of its October production of 10.544 million bpd.

Saudi Energy Minister Khalid al-Falih said last month that January oil production could fall below the kingdom’s agreed ceiling.

“We have done a very high reduction to Aramco’s customers in Europe and the U.S., and some customers in Asia, which will bring the kingdom’s production below the agreed upon ceiling,” he said.

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.

Saudi oil buyers will be notified by Jan. 10 of their respective crude allocations for February.

“Saudi Arabia, out of OPEC (members), is the country where we should expect the most compliance (to the OPEC agreement). In a sense, it is a confirmation that they are doing what they said they will do,” Petromatrix oil strategist Olivier Jakob said.

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.”

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.

Additional reporting by Nidhi Verma in NEW DELHI and Aizhu Chen in BEIJING and Ahmad Ghaddar in London. Writing by Ahmad Ghaddar and Florence Tan; Editing by Alexandra Hudson and David Evans

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