Saudi Aramco Cuts Asian Oil Supplies by 10% for Feb.

By Christian Schmollinger

Jan. 9 (Bloomberg) -- Saudi Aramco, the world’s biggest state oil company, will lower crude supplies to Asia in February, the third month of cuts, as OPEC implements a 9 percent reduction in output.

The Dhahran, Saudi Arabia-based producer will cut shipments by 10 percent from levels agreed in annual contracts with refiners in Japan and Taiwan, said two officials who received notices from the company. They asked not to be identified because of confidentiality agreements.

The Organization of Petroleum Exporting Countries agreed on Dec. 17 to new production targets starting Jan. 1 which are 9 percent lower than its November quotas. The group is trying to stem New York crude oil futures’ more than 70 percent plunge from a record $147.27 a barrel on July 11.

“This shows that they are really serious since this, I think, actually puts them below their quota,” said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “As OPEC cuts back on their term, it means buyers will have to come back to the spot market.”

Saudi Aramco sells its supplies only by long-term contracts. Refiners and traders can purchase cargoes for a specific month on the so-called spot market.

Saudi Arabia, OPEC’s biggest producer, agreed to an output target of 7.714 million barrels a day starting in January. The kingdom produced 8.4 million barrels a day in December, less than the previous quota of 8.477 million barrels, according to a Bloomberg survey

Saudi Arabia’s cuts follow similar reductions from the other OPEC members.

Iran, OPEC’s second-largest producer, told Asian refiners on Jan. 7 that it would reduce shipments by 14 percent in February.

Kuwait, OPEC’s third-largest producer in November, will reduce oil supplies by 5 percent starting Jan. 22. Qatar, the group’s second-smallest producer, will slash cargoes by as much as 6 percent in February, compared with 5 percent a month earlier.

Abu Dhabi National Oil Co., the United Arab Emirates state- owned producer, said Dec. 26 it would cut crude-oil exports in January and February.

Abu Dhabi National, known as Adnoc, cut the supply of its Murban grade by 15 percent and the Upper Zakum grade by 3 percent in January, mostly in Asia. In February, Adnoc will decrease the supply of Murban by 15 percent, Lower Zakum by 10 percent, Umm Shaif by 10 percent and Upper Zakum by 15 percent.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.