UAE's ADNOC to cut volumes of Murban, Upper Zakum by 20% in June: source

Dubai — Abu Dhabi National Oil Co. will cut volumes of its flagship Murban and Upper Zakum grades by 20% in June, compared with 15% cuts for May volumes, in line with the UAE's compliance with cuts agreed by OPEC and its allies, a source familiar with the matter told S&P Global Platts on Tuesday.

ADNOC will cut volumes of its Umm Lulu and Das grades by 5% in June, the same level of cuts for May, the source added.

The state-owned entity today informed its customers about the June cuts, the source added.

ADNOC declined to comment.

The UAE -- OPEC's third largest oil producer -- has agreed to cut output from about 4.1 million b/d in April to around 2.5 million b/d in May and June. The reductions are part of the action agreed by the broader so called OPEC+ pact that will see 23 members trim output collectively by 9.7 million b/d during these two months.

The OPEC+ coalition will reduce the output cuts gradually through to April 2022 as global demand picks up.

RECORD DROP

OPEC+ producers are curbing production as global oil demand continues to plummet to unprecedented levels.

Global oil demand is expected to fall by a record 9.3 million b/d on the year in 2020, the IEA said earlier this month, as containment measures in 187 countries bring mobility to a virtual standstill. The worst of the demand collapse will be seen in April, which could see consumption plunge to 1995 levels.

The Paris-based agency forecasts demand dropping by as much 29 million b/d on the year in April followed by a plunge of 26 million b/d in May.

The OPEC+ alliance is scheduled to meet next June 10 via webinar.

ADNOC OSPs

ADNOC announced earlier this month deep cuts to the official selling prices of its crude oil loading in May and also set the price of Murban crude at a discount to medium, sour Upper Zakum for the first time.

The May OSP for Murban was a discount of $6.95/b to Platts Dubai crude assessments for the month. It set the Upper Zakum at a premium of 10 cents/b to the Murban OSP, the Das Blend OSP at a discount of 35 cents/b to Murban and Umm Lulu at parity with Murban.

For April, the Murban OSP was at a $2.75/b discount to Platts Dubai crude assessments. April Upper Zakum was at a 30 cents/b discount to Murban, Das Blend at a 25 cents/b discount to Murban and Umm Lulu at a 10 cents/b premium to Murban OSP.

ADNOC's cuts, which were in line with expectations, followed on the heels of Saudi Aramco, which cut the OSPs of its May-loading crude to Asian customers.

(Updates with May OSPs, global demand outlook.)