As per sources, Iran and Kuwait will deepen curbs on supplies to customers this month, as both Persian Gulf producers join OPEC peers in cutting back output to put a firmer floor beneath prices.
The measures add to growing evidence that OPEC's biggest members are visibly tightening the taps after the group agreed last month to cut production by a record 2.2 million barrels per day, taking their total curbs since September 2008 to 4.2 million barrels per day, the equivalent of 5% of global oil supply.
The sources added that Iran has informed at least two buyers that their term supplies would be cut by 14% in January 2008. While those deep cuts apply to customers who only buy a marginal 60,000 barrels per day of Iran's 2 million barrels per day of exported crude to Asia, the fact that Iran took visible action could help brush away nagging concerns that some members might shirk their commitments.
Also Kuwait Petroleum Company notified at least 6 Asian refiners that it would cut term crude oil allocations loading from January 22nd 2009 by 5%. A 5% cut in Kuwait's sales to Asia would be equivalent to up to a 65,000 barrels per day cut, well below its implied target cut of 370,000 barrels per day.
Both Iran and Kuwait also sell crude to Europe, and KPC also exports to the US, implying that not all supply cuts would be shouldered by Asia.
KPC also told its customers that it would continue to disallow them to utilize "operational tolerance" on cargoes to load up to five per cent above term volumes on each cargo, a ban it first imposed in late December, the sources added.
Meanwhile, expectations of OPEC compliance with the cuts, coupled with Israeli onslaught on Gaza and the Russian gas dispute, have helped lift oil prices from a low of near USD 32 a barrel in mid December 2008 to around USD 48.