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Dubai — Crude oil production from the neutral zone where Saudi Arabia and Kuwait share output equally will reach 550,000 b/d by the end of the year after a pumping trial from the region started on Sunday, according to a new estimate from Kuwait's oil minister.

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Saudi Arabia and Kuwait will gradually ramp up production from the offshore al-Khafji field and the onshore Wafra field, Khaled al-Fadhel said, the state-run KUNA news agency reported on Sunday.

Al-Khajfi is owned by Saudi Arabia's Aramco Gulf Operations Co. and Kuwait Gulf Oil Co., a unit of state-run Kuwait Petroleum Corp., and Wafra is operated by KGOC and Saudi Arabian Chevron.

Saudi Arabia and Kuwait signed agreements in December to restart production from the neutral zone which has been shut in for more than four years. Oil ministers in both countries have said that the resumption of production would not impact their commitments to OPEC+ cuts.

The agreements signed in December also included a provision to start studies on developing the Dorra gas field in the neutral zone, al-Fadhel said on Sunday.

Kuwait, which has an OPEC+ quota of 2.67 million b/d, is complying with that level, he added. Kuwait plans to boost its oil production capacity to 4 million b/d, he said.

Saudi energy minister Prince Abdulaziz bin Salman said in December production from Khafji could reach 325,000 b/d by the end of 2020. Both Kuwait and Saudi Arabia have said the resumption of oil production from the divided zone would not clash with their OPEC+ commitments.

Bad timing?

Kuwait's latest estimate for the neutral zone production capacity is also higher than a recent forecast by the International Energy Agency and comes as the OPEC-led group of major oil producers considers deeper production cuts in response to the impact on China's oil demand from the coronavirus outbreak.

Saudi Arabia and Kuwait could pump 320,000 b/d from the neutral zone a year after the resumption of production, the IEA said last week in its latest monthly oil market report.

The offshore al-Khafji field, owned by Saudi Arabia's Aramco Gulf Operations Co. and Kuwait Gulf Oil Co., could produce about 60,000 b/d by August and after one year 175,000 b/d, the Paris-based agency said in its monthly oil report. The onshore Wafra field, which is operated by KGOC and Saudi Arabian Chevron, may produce 80,000 b/d in Q4 2020 and later 145,000 b/d, it said.

OPEC + is in the midst of a trimming 1.7 million b/d from global oil markets through the end of March to soak up an expected surplus in Q1 2020. The coalition, which deepened cuts from 1.2 million b/d implemented in 2019, is mulling shaving another 600,000 b/d of output to deal with the impact on global oil demand from the deadly coronavirus. Russia is still studying that proposal. OPEC on Wednesday shaved 230,000 b/d from its 2020 world oil demand forecast due to the virus outbreak, which has caused a slowdown in Chinese economic activity and suspensions of hundreds of flights, as the death toll continues to rise.