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Is President Trump the “Trump” Card for the Oil Market?

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Part 3
Is President Trump the “Trump” Card for the Oil Market? PART 3 OF 6

Will OPEC’s Crude Oil Production Fall in February 2017?

OPEC’s crude oil production 

A Platts survey estimates that OPEC’s (Organization of the Petroleum Exporting Countries) crude oil production fell by 690,000 bpd (barrels per day) to 32.27 MMbpd (million barrels per day) in January 2017—compared to the previous month. The fall in OPEC’s production would support crude oil (BNO) (PXI) (USO) (UCO) prices. OPEC’s production fell due to due to major producers’ production cut deal.

Higher crude oil prices would have a positive impact on oil producers such as Stone Energy (SGY), Chevron (CVX), Northern Oil & Gas (NOG), Bill Barrett (BBG), Bonanza Creek Energy (BCEI), and Cobalt International Energy (CIE). For more on crude oil prices, read Part 1 in this series.

Will OPEC’s Crude Oil Production Fall in February 2017?

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OPEC and historic production cut deals 

OPEC’s crude oil production hit a record 33.7 MMbpd in November 2016. Below are the historic production cut deals for OPEC and non-OPEC producers since September 2016 to support oil prices.

A Reuters survey estimates that OPEC’s crude oil production fell by more than 1 MMbpd to 32.27 MMbpd in January 2017—compared to the previous month.

OPEC’s monthly production fell due to the decrease in production from:

  • Saudi Arabia – production fell by 470,000 bpd (barrels per day) to 9.98 MMbpd
  • Kuwait – production fell by 180,000 bpd to 2.72 MMbpd
  • UAE – production fell by 160,000 bpd to 2.93 MMbpd

OPEC’s crude oil production fell in January 2017 due to the historic deals mentioned above. An S&P Global Platts survey showed that OPEC producers had 91% compliance with its targeted output cuts in January 2017—above most market forecasts.

EIA’s crude oil production estimates in 2017

OPEC’s crude oil production averaged ~31.7 MMbpd and ~32.8 MMbpd in 2015 and 2016, respectively. The EIA (U.S. Energy Information Administration) estimates that OPEC’s crude oil production will average ~33.2 MMbpd in 2017 and ~33.7 MMbpd in 2018.

Higher OPEC production could pressure crude oil (FENY) (SCO) (RYE) (BNO) prices in 2017. However, OPEC’s production is expected to be ~32.5 bpd in the next six months due to the production cut deal. Read What Will Happen if the Oil Producer Meeting Succeeds? to learn more. The expectation of OPEC’s slowing crude oil production could have a positive impact on crude oil prices in 2017.

Next, we’ll analyze Saudi Arabia’s crude oil production.

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