Abu Dhabi cuts supplies

SINGAPORE: The United Arab Emirates unexpectedly reduced allocations to Asian term buyers on Tuesday, as values of Middle East crude remained under pressure from an expected surplus of Saudi supplies in coming months.

Although the Abu Dhabi National Oil Co (ADNOC) will lift supplies of the country's flaghip grade Murban, it introduced cuts for its other grades: Umm Shaif, Upper Zakum and Lower Zakum.

Abu Dhabi's decision to restrain supply of those grades and retain a smaller cut for Murban comes as a surprise after Gulf members of OPEC including the U.A.E. pledged to increase output to meet rising demand for crude in the third quarter after OPEC failed to reach consensus at a meeting earlier this month.

ADNOC will supply Murban crude at 5 percent below contracted volumes in August, versus a 10 percent cut in July, the main exporter for OPEC member United Arab Emirates said on Tuesday.

Allocations for Umm Shaif and Upper Zakum will both be supplied at 8 percent below contracted volumes, while Lower Zakum will be supplied with a 5 percent cut, ADNOC said in a statement.

Surgutneftegaz, Russia's fourth-largest oil producer, sold via tender four cargoes of ESPO crude for loading in August to September at lower premiums than the previous month.

Surgut sold the cargoes to oil majors, including Shell, at premiums of between $3.50 and $3.75 a barrel to Dubai quotes, traders said, although this could not be confirmed.

- Top Russian producer Rosneft was also heard to have awarded two ESPO cargoes for August and September at similar premium, although details were slow to emerge.

The Brent/Dubai Exchange of Futures for Swaps (EFS) for August rebounded by $1.25 to $4.55 a barrel at 0830 GMT, Reuters data showed. The front-month EFS on June 15 touched $9.20, the highest intraday value since the spread reached a record of almost $12 in October 2004.

August Oman traded on the Dubai Mercantile Exchange (DME) rose 6 cents to a premium of 53 cents a barrel to Dubai swap quotes at 0830 GMT, using the settlement price for DME futures, the ICE one-minute marker for Singapore and the Brent-Dubai EFS as calculated by Reuters.

Rates for oil tankers on key Asian freight routes are expected to weaken over the next week, pressured by the IEA's release of emergency stockpiles of crude and refined fuel products, shipbrokers said.

The IEA's release of oil stocks was a temporary measure to fill a supply gap before extra Saudi Arabian production emerged, its executive director said on Tuesday.

Kuwait's Supreme Petroleum Council (SPC) has approved construction of the long-delayed al-Zour refinery, the Middle Eastern country's oil minister said.

China issued its first shale gas exploration tender with an offer of four blocks to a group of Chinese energy companies, state media reported, as the country kicks off its search for potentially vast reserves of the unconventional resource.

Complex processing margins for Dubai in Singapore were around $5.22 per barrel, down from an average of the last five days of $8.66, Reuters data show. Over the last year, the average margin has been around $6.36 per barrel.

IEA's release of emergency oil stocks depressed already weak distillates margins.

CRACK SPREADS

Fuel oil's July crack widened 64 cents to a discount of $4.98 a barrel to Dubai crude.

Gas oil's July crack fell 52 cents to a premium of $16.79 a barrel to Dubai crude.

The naphtha CFR Japan front-month crack widened 19 cents to a discount of $10.71 a barrel to Brent.

OUTRIGHT PRICES

August ICE Brent was at $106.94 a barrel at 0830 GMT, up $2.93 from Monday.

Copyright Reuters, 2011