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UAE's ADNOC deepens supply cuts to Asia in June in 'fragile' market: sources

SINGAPORE (Reuters) - Abu Dhabi National Oil Company (ADNOC) has deepened crude oil supply cuts to Asian customers in June to 10-15% from 5-15% in May, one week ahead of an OPEC+ meeting, several sources with knowledge of the matter said on Thursday.

FILE PHOTO: An Emirati man is seen near the logo of ADNOC in Ruwais, United Arab Emirates May 14, 2018. Picture taken May 14, 2018.REUTERS/Christopher Pike

The supply reduction will apply to the four grades of crude that ADNOC sells to Asia, namely Murban, Das, Umm Lulu and Upper Zakum, they said.

The cuts are part of the United Arab Emirates’ (UAE) obligation under a pact between the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, to reduce output and balance global oil markets.

A spokesman for ADNOC said the company “confirmed crude oil allocations to its term customers for both May and June, in preparation for the launch of ICE Futures Abu Dhabi (IFAD)”.

“Allocated volumes of Murban are in line with the figures reported in the ADNOC Onshore ‘Murban Export Availability Forecast Report’,” he added.

ADNOC’s June allocation comes ahead of the next OPEC+ meeting scheduled on April 1, where producers will decide on May supplies.

OPEC+ sources told Reuters they expected the producer group to broadly stick to its current output cut levels, amid a deteriorating demand picture in Europe due to new lockdowns.

The UAE, the third biggest oil producer in OPEC behind Saudi Arabia and Iraq, pumps about 2.5 million to 3 million barrels per day, mostly produced by ADNOC.

Four OPEC+ sources told Reuters they expected a similar decision to the last meeting as a new wave of lockdowns across Europe to curb the spread of the COVID-19 virus has threatened to cool fuel demand. OPEC+ then broadly stuck to its cuts, allowing Russia and Kazakhstan a modest rise of 150,000 barrels per day.

ADNOC’s supply reduction was aimed at supporting the market, one of the sources said.

“Apparently the market is very fragile,” the source said.

Crude oil producers from Europe, Africa and the United States have faced difficulties selling to Asia, especially China, as buyers took cheaper oil from storage while refinery maintenance has reduced demand, industry sources said.

June also happens to be the first contract month for Murban crude futures, which will be launched by the Intercontinental Exchange Inc on March 29.

Khaled Salmeen, who heads ADNOC’s downstream, marketing and trading department, said in early March the UAE was adhering to OPEC’s reduction pact, and ADNOC had enough storage to ensure uninterrupted supply of Murban despite production restrictions.

Reporting by Florence Tan and Shu Zhang; Additional reporting by Ahmad Ghaddar in London; editing by Mark Potter and Jason Neely

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