8,478 Active Recruiters     Over 2 Million Candidates Globally

  1. Keep me logged in
  2. forgot password

Checkout Jobs Basket (0)

You can checkout a maximum of 150 jobs.

Signup Better for Candidates

  • Create a free virtual CV and let recruiters find you
  • Automatically have your profile matched to suitable Oil & Gas positions
  • Link to your profile using it as a free online CV
  • Store all your employment documents to your profile for easy sending
  • Always receive feedback on positions applied for

Signup Better for Recruiters

  • Suitable candidates automatically matched to your position
  • View candidate profiles for free
  • No more waiting for candidates to respond to job advertisements
  • Only ever pay when you match a candidate to a position
  • No more cold calling and sorting through out dated CVs

OPEC Oil Cut Extension Renews Asia's Crude Supply Worries

Published in Oil Industry News on Tuesday, 30 May 2017

Graphic for News Item: OPEC Oil Cut Extension Renews Asia's Crude Supply Worries

The OPEC-led decision to extend a production cut to March 2018 disappointed financial investors, prompting an exit from oil futures markets, while refiners in Asia were mostly concerned with whether it meant they would need to go hunting for crude.

In Vienna, the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers on Thursday extended a pledge to cut 1.8 million barrels per day (bpd) of output until the end of the first quarter of 2018.

Financial traders did not like what they heard, thinking it meant an ongoing oil glut. "The market voted with its feet", investment bank Jefferies said, dragging crude futures CLc1 LCOc1 down 5 percent to near $50 a barrel. [O/R]


In physical markets, however, where tankers can take weeks or months to deliver up to $100 million in crude oil, refiners want to know if they will be forced to search for new suppliers.

"This is a declaration of a strong will of OPEC as well as non-OPEC producers to tighten overall supply-demand," said Yasushi Kimura, president of the Petroleum Association of Japan, and chairman of petroleum conglomerate JXTG Holdings (5020.T).

To ensure crude supplies, "we need to carefully monitor OPEC's production cut adherence," Kimura said.

Crude is by far the biggest cost for refiners and the petrochemical industry, shaking margins DUB-SIN-REF whenever benchmark prices take broad swings.

Kimura said the extended cuts could mean demand may exceed supply in 2017, which would be the first time in years.

This would force refiners to start using up reserves, pushing up prices at least until production catches back up with consumption.

"In 2017, global demand is likely to exceed supply ... and crude prices are likely to ... rise toward $60 by the end of the year," JXTG Holdings' Kimura said.


So far, though, the cuts that started in January have barely dented supply in Asia, home to three of the world's four biggest oil consumers.

Exporters were keen to maintain global market share, and they cut domestic supplies or shipments to marginal buyers. As a result, inventories in the big consumer markets have remained bloated, and prices low.

"We have (so far) not had any impact in terms of any cut from any of these (OPEC) sources into India," said B. Ashok, chairman of Indian Oil Corp (IOC.NS), the country's biggest petroleum company.

OPEC sources said that will change as top exporter Saudi Arabia especially is keen to see a visibly tighter market.

Many refiners, however, are still not expecting a real crude shortage, largely due to ample alternative supplies.

"Crudes that can be processed in our refineries include crudes from the U.S. We have procured some crude even from Canada. We have been procuring crude from Latin America ... Africa, Russia," Ashok said.


U.S. producers have become a key alternative source of supply as their output - largely due to shale oil - has soared by 10 percent since mid-2016 to 9.3 million bpd C-OUT-T-EIA, close to Saudi Arabia's and Russia's levels.

These producers have been fast to fill OPEC's gap, with an average of 374,000 bpd of crude from the United States coming to Asia in the first four months of 2017, according to data compiled by Thomson Reuters Oil Research and Forecasts.

That compares with an average of just 48,000 bpd in 2016.

"The cut in OPEC supplies will be offset by higher U.S. crude production," said KY Lin, spokesman for Formosa Petrochemical Corp. (6505.TW), one of Asia's biggest refiners and petrochemical producers.

Still, most analysts including Goldman Sachs, Jefferies and Barclays, expect prices to gradually rise toward the beginning of 2018 as the market tightens.

While consumers may have to live with higher prices as OPEC and its allies hold back output, the longer the policy lasts, the more the cartel risks losing permanent market share.

"In response to ... OPEC production cuts we are working on diversification of crude oil import sources and looking beyond the Middle East," said Kim Wookyung, a spokeswoman at SK Innovation (096770.KS), owner of South Korea's largest refiner SK Energy.

Source: www.reuters.com

Please leave comments and feedback below


OPEC Oil and Gas, OPEC, Global Oil and Gas, Saudi Oil and Gas, Iran Oil and Gas, Russian Oil and Gas, Oil Price Freeze, Asian Oil and Gas, Oil and Gas News

Oil and Gas News Archive

Latest Oil & Gas News

Featured Companies

  • View All JobsOMPA

    Offshore Marine People & Academy (OMPA) is a global provider of personnel and training to the renewables, oil & gas, telecommunications and marine industries.

    With over 15 years' industry experience, we work with candidates to match them to the right roles and equip them with the skills and knowledge needed to succeed. Our job is to exceed your expectations.

    Visit us online: offshorempa.com

  • View All JobsChronos Oil and Gas

    Chronos Oil and Gas is one of the fastest growing and best placed recruitment agencies in the sector.

    With over 300,000 candidates on our database and an international team of specialist recruiters we work with clients to staff major projects around the world.

    Register your CV at www.chronosoilandgas.com

  • View All JobsNatural Resources

    Natural Resources is a UK based recruitment company providing personnel of all disciplines and nationalities worldwide.

    We represent clients and candidates at all levels who operate globally within oil & gas, renewables, nuclear, power, mining, marine, drilling, construction and petrochemicals. Our client base includes energy and construction.

    Visit Natural Resources at natural-resources.com