United Arab Emirates (UAE) crude oil exports are expected to fall in the fourth quarter of 2015 as the Gulf OPEC member upgrades its Ruwais refinery and processes more oil to feed rising domestic demand, industry and trading sources said.
The UAE’s Ruwais refinery expansion, which more than doubles the plant’s capacity from 415,000 barrels per day (bpd), was completed late last year and is expected to hit full capacity before the end of the year, traders say.
The plant will boost the UAE’s total refining capacity to more than 1 million bpd, which will help supply the local market and increase the country’s oil products exports.
The added refining capacity, however, will eat into crude available for exports, Gulf-based oil and trading sources said.
One source familiar with the matter said the fourth-quarter fall in crude exports from state-run Abu Dhabi National Oil Company could be as much as 200,000-250,000 bpd.
The cuts would not affect the long-term contracts ADNOC has with its clients, but it would limit its short-term deals, the source said. “These (short-term) volumes would go to the local market,” the source said.
Some reductions in exports have already been seen since ADNOC began commissioning work at Ruwais, but the diversions to the refinery have been somewhat muted by a late-2014 increase in the output of ADNOC’s flagship crude by 200,000 bpd to 1.6 million bpd, according to a buyer of Abu Dhabi crude.
Also, a portion of the refinery’s throughput is made up of the ultra light oil known as condensate, which is not included in the UAE’s crude output and export figures.
ADNOC has been exporting the Murban grade to Asia at the low-end of its contracted tolerance levels since March, when it began to ramp up refinery operations at Ruwais.
Run rates at the refinery are now at about 70-80 percent of capacity, according to trading sources.
ADNOC could not be reached for comment.
Some trading sources said they expect the export cuts to be higher than 250,000 bpd when Ruwais reaches full capacity.
In May, the UAE’s crude exports were around 2.8 million bpd, the source familiar with the matter said. That is compared with 2.64 million bpd a year earlier, according to official figures.
A reduction in UAE crude flows could help ease a global oil glut more quickly than expected and thus support oil prices that have fallen by nearly half since mid-June 2014.
The UAE has one of the world’s highest rates of per capita oil consumption, driven by rapid economic and population growth, according to the U.S. Energy Information Administration.
ADNOC has taken over supplying the seven emirates of the UAE with fuel this year. Abu Dhabi, the capital of the UAE, controls more than 90 percent of the UAE’s oil reserves.
Top oil exporter and OPEC heavyweight Saudi Arabia has also been expanding its refining capacity to meet soaring local demand and aims to become a major exporter of refined oil products.
(Reporting by Rania El Gamal, with additional reporting by Florence Tan in SINGAPORE; Editing by Tom Hogue)
This article was from Reuters and was legally licensed through the NewsCred publisher network.