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Tuesday, April 28, 1998

Asia crude-oil outlook firm as Indonesia details output cuts 

Azlin Ahmad  
Singapore, April 27: The Asian crude market is expected to rise this week after Indonesia informed contractors details of output cuts, but the extent of the rise will depend on the amount of West African supplies moving east, traders said on Monday.

Indonesia's state oil company Pertamina sent letters to foreign producers in Indonesia last week detailing individual production cuts in line with the country's Opec agreement to reduce output.

Caltex, the largest producer in Indonesia, has been asked tocut 30,000 barrels-per-day (bpd) from its production of 740,000 bpd.

The cuts were effective from April 1 to December.

But traders in Asia were still unclear how much term volumes and the monthly allocations for April and May would be affected.

"Supplies will be tighter, but we don't know yet how our liftings will be affected," said one term buyer.

Traders said unsold barrels of heavy sweet Indonesian Minas and Vietnamese Bach Ho crudes were also limiting the bullish impact of the Indonesian outputcuts.

"There are still Minas and Bach Ho available for May, but buying interest right now is very thin," said a trader.

"It is difficult to see yet how much prices will move up with the Indonesian cuts," he added.

More West African cargoes were expected to come into Asia following a narrowing of the Brent/Dubai spread, which traders said could meet some of the potential shortfall in regional crude supplies.

Only two very large crude carriers (VLCC) and one 900,000 barrel cargo of West African crudes have been purchased by South Korean refiners for delivery in June, although interest was still being shown by Asian buyers, such as Chinese refiners.

In Middle East crudes, prices of June Oman and Abu Dhabi crudes are expected to be steady in a balanced market.

Abu Dhabi Murban crude for June was last traded around 31 cents per barrel premium to the official ADNOC price, slightly higher than trades done between ADNOC +28 to 30 cents last week.

But Dubai could come under pressure due to small volumespurchased by India for June, traders said.

In its June tender awarded over the weekend, India bought just one cargo of Dubai, out of five cargoes that were offered. India also bought one VLCC of Nigerian Escravos and two VLCCs of Nigerian Qua Iboe, as well as one VLCC of Egyptian Gulf of Suez and Zeit Bay combination, traders said.

Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.



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