Crude prices rise as OPEC cuts output

Crude prices rise as OPEC cuts output

SINGAPORE (Reuters): Asian market crude prices have firmed
sharply, lifted by OPEC output cuts and lingering fears of more
production curbs in store, traders said on Friday.

Regional crude sellers such as Malaysia, Vietnam and Australia
have all benefited from higher export prices on the back of
OPEC's decision to reduce crude flows from February 1.

Most markets jumped into premiums from discounted levels for
March-loading barrels after the Organization of the Petroleum
Exporting Countries (OPEC) agreed in mid-January to lower group
output by 1.5 million barrels per day (bpd).

OPEC's Middle East exporters have since cut term supplies to
the region by 10-20 percent, leaving clients to scrabble for spot
barrels.

Indonesia, Asia's only OPEC member, will still be able to pump
at full flows at about 1.28 million barrels per day (bpd) because
it failed to meet its production target under OPEC's previous
output ceiling.

"The Asian spot crude market is much stronger than last month.
There was some initial reluctance to pay up, but it looks like
buyers are catching on to the higher prices," one Asian oil
trader said.

Facing reduced supplies, Asian buyers have raced in the last
two weeks to pick up spot Middle East high sulfur, or sour grades
and quickly cleared out March barrels of Oman, Abu Dhabi and
Qatar crudes.

Buyers have turned attention to Asian low sulfur sweet crudes
this week, which normally trade a shorter 15-30 days ahead of
lifting.

Some 1.2 million barrels of Malaysian light sweet benchmark
Tapis and Labuan crudes for March loading were exchanged this
week at about +30 cents over published prices.

Prices for these crudes in February were flat to published
prices or at discounts.

"We are revising our offers up after seeing the premiums on
recent deals," one Malaysian trader said.

That trader was now asking +35 cents for a remaining cargo of
Labuan and a higher +20 cents for other crudes Miri and Masa.

Fresh demand from Asian refiners also helped close the
arbitrage window for crudes to move to the United States, traders
said.

Over a million barrels of Tapis and Indonesian Duri were fixed
to move out of the region in February on the back of a slump in
prices.

Australian crudes also have seen stronger premiums.

Traders said that light sweet Northwest Shelf, Laminaria and
Cossack cargoes were recently done between 10 and 20 cents over
benchmark Tapis. This was a marked improvement from previous
trades at minus 30-40 cents.

Medium sweets such as Indonesian Minas and Duri and Vietnam's
Bach Ho have been a little slower to start trading.

But Minas sellers anticipate that buyers will pay premiums of
up to 20 cents over the Indonesian Crude Price (ICP) for March,
slightly more than for February barrels.
The lack of arbitrage opportunities for competing West African
crudes also bolstered Asian crudes, traders said.

They said that a rallying Brent market, on which African
crudes are priced off, has kept barrels away from Asia since
January.