SINOPEC ENGINEERING (GROUP) CO., LTD. 
Saudi Arabia, the de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), will target its supply cuts at refiners in the United States and Europe rather than Asia. Ally Kuwait is following a similar strategy, and OPEC's second-largest producer Iraq is even raising exports to Asia.
"U.S. and European refiners are having January allocations cut from Saudi Arabia, Kuwait and the UAE (United Arab Emirates)," Morgan Stanley said on Monday in a note to clients.
This comes as refiners from Japan, China and South Korea have told Reuters they have not received reduction notices from most Middle East suppliers except for slight restrictions from Abu Dhabi that are within contractual limits.
The producers fear that their self-imposed cuts starting in 2017 would allow U.S. oil companies to sneak in and grab market share.
Yet shielding Asia could undermine OPEC's strategy to eat into the world's bloated stockpiles through supply reductions as Asia also sits on enormous fuel stocks, likely weighing on prices through 2017.
"It may take some time for crude supplies to tighten in Asia, which I expect around the second half of 2017," said Eng Hian, head of trading at AgriTrade Energy in Singapore, which owns three supertankers. "Consider the existing supply overhang."
Targeting the United States, OPEC is hoping that producers there will keep more of their own production at home to meet demand, instead of exporting to Asia, said Virendra Chauhan, oil analyst at Energy Aspects in Singapore.
Asian refiners have said they plan to buy oil from alternative sources, including the U.S., if OPEC cuts, and BP (>> BP plc) and Sinopec (>> SINOPEC Engineering Group Co Ltd) have already started bringing U.S. oil to Asian refiners.
Even Russia, which led a group of non-OPEC oil producers to join a cut of up to 1.8 million barrels per day (bpd) of supply, is showing few signs of reducing exports.
Russia this year over overtook Saudi Arabia as China's biggest oil supplier because of its pipeline connections.
Export schedules signed off by the energy ministry and seen by Reuters showed Russia plans to increase crude exports and transit across its territory by 200,000 bpd in the first quarter of next year.
OIL STILL HELD ON TANKERS
Even as oil flows to Asia look likely to continue, the region still sits on millions of barrels of unsold crude and refined products.
Shipping data in Thomson Reuters Eikon shows that between 26 and 30 million barrels of crude or fuel oil are sitting on around 20 supertankers just off of Singapore and southern Malaysia's Johor state.
Onshore, Asia is sitting on ample inventories as well. China's implied stockpile build up from March to October has averaged 740,000 barrels per day, based on monthly data from the General Administration of Customs and National Statistics Bureau, a higher increase than in the previous two years of the glut.
China's commercial crude stockpile sat 239.8 million barrels in October, with South Korea at 35.3 million barrels for the same month. The latest figures from Japan show them holding 91.2 million barrels. That compares with U.S. crude inventories at 483 million barrels.
Jonathan Chan of Singapore-based brokerage Phillip Futures said there was still an excess of 1 billion barrels of oil sitting in tanks globally.
"For prices to go up further decisively, these inventories will first have to be clear out," he said.
(For graphics on OPEC's market share struggle, click http://tmsnrt.rs/2cWq5NN)
(For graphics on OPEC's dwindling spare capacity, click http://tmsnrt.rs/2g7oeps)
(Reporting by Henning Gloystein; Additional reporting by Florence Tan, Roslan Khasawneh, Jane Chung, Osamu Tsukimori and Keith Wallis; Writing by Henning Gloystein; Editing by Christian Schmollinger)
By Henning Gloystein
