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.