Abu Dhabi National Oil Company (ADNOC) has notified some term customers that it will reduce the volume of Upper Zakum crude oil supply in 2024, three sources with direct knowledge of the matter said on Thursday.
The move could affect supplies to China, the world's top crude importer as well as the biggest lifter of Upper Zakum crude.
It is not immediately known how much volume of the medium-sour grade ADNOC will reduce for existing customers, they added.
ADNOC did not provide a reason for the reduction, the sources said.
The producer did not immediately respond to an emailed request for comment.
"Our understanding is that ADNOC needs to keep more Upper Zakum crude for its own refinery use," said one of the sources.
In 2018, ADNOC invested $3.5 billion to upgrade its 837,000 barrels per day Ruwais refinery to process up to 420,000 bpd of heavier and more sour crude including Upper Zakum, according to the company website.
The refinery currently refines predominantly Abu Dhabi's flagship light sour grade Murban.
It was not immediately clear when the refinery upgrade will be completed.
Some of the buyers have been given the option to take more Murban crude instead, said the sources, as the refinery project will free up more Murban for exports.
However, the quality of Murban differs from Upper Zakum.
"Not all refiners are willing to buy more Murban, as it can not really replace Upper Zakum," said the second source.
"So we have to buy other grades of medium crude from the spot market."
Of the 940,000 bpd of Upper Zakum exported so far this year, two-thirds of the volume have gone to China, ship tracking data from Kpler showed.
Market participants had already expected supply of medium sour crude to tighten in 2024 as Kuwait and Oman are expected to reduce crude exports following the start-up of two mega-sized refineries, Al Zour and Duqm. A lower Upper Zakum allocation may intensify the tightness.
"It may not be a entirely bad thing to cut Upper Zakum volume," the first source said.
"The crude is getting very expensive, and we now have more room to choose cheaper options."
(Reuters - Reporting by Muyu Xu and Florence Tan, Additional reporting by Yousef Saba; editing by Muralikumar Anantharaman and Jason Neely)
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