Return of neutral-zone oil another supply headache for OPEC+

Oil exports from the neutral zone between Kuwait and Saudi Arabia will resume from next month, adding more supply just as OPEC tries to cut output to stem a coronavirus-driven price rout.

Kuwait Petroleum Corp. told customers that production at the Khafji field in the zone has already restarted, with exports on track from April, according to people who had seen a notice sent by the company. That came after the state-owned producer said in mid-February that output from the Wafra field, also in the zone, would start within three months.

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The neutral zone can pump a combined 500,000 barrels a day of crude but has been out of action for more than five years due to a spat between Saudi Arabia and Kuwait. The resumption of exports comes as OPEC is trying to limit production, proposing an additional 1.5 million barrels a day of output cuts to offset the economic hit from the virus.

Buyers were asked to indicate their interest in the grade and send inquiries on operational and logistical matters to KPC in the notice, according to the people who asked not to be identified because of company policy.

The two fields could reach full capacity by the end of this year, KPC CEO Hashem Hashem said in mid-February after the two countries resolved their dispute in December.

Spanning more than 5,700 square kilometers (2,200 square miles), the zone was created by a 1922 treaty between Kuwait and the fledgling Kingdom of Saudi Arabia. In the 1970s, the two monarchies agreed to divide the area and incorporate each half into their respective territory while still sharing and jointly managing the zone’s petroleum wealth.