Supply and demand are the drivers of oil prices, and the world’s top exporter of oil is Saudi Arabia. Therefore, market participants and energy companies watch Saudi production figures as they affect the price of oil and therefore earnings of oil producers such as ExxonMobil (XOM), Chevron (CVX), ConocoPhillips (COP), and Hess Corp (HES).
As seen in the below chart, Saudi Arabia produced ~9.1 million barrels a day of oil in January, the lowest figure since May 2011. Some market participants noted that the cut in production may have been in response to expectations for lower demand for OPEC crude.
January’s low oil production was also preceded by a low oil production figure in December. In December, Saudi Arabia had cut production by ~5% from November. The production cuts follow a period where Saudi Arabia had increased production to compensate for supply cuts in Libya during the Arab Spring and supply cuts due to oil sanctions against Iran. This demonstrates that Saudi Arabia has a large amount of excess capacity and has the power to cut and raise production to provide price stability.
Therefore, market participants and energy companies watch Saudi production figures as an important indicator in the supply of crude, which consequently affects crude oil prices and earnings of oil producers. Such producers include ExxonMobil (XOM), Chevron (CVX), ConocoPhillips (COP), and Hess Corp (HES), and many are also constituents of the Energy Select Sector SPDR ETF (XLE).