Non-OPEC crude oil production
On January 18, 2016, OPEC (Organization of the Petroleum Exporting Countries) published its Monthly Oil Market Report. OPEC projects that non-OPEC crude oil production could fall in 2016 due to lower crude oil prices. Non-OPEC crude oil production is expected to fall by 700,000 bpd (barrels per day) in 2016. US crude oil production is expected to fall by 400,000 bpd in 2016. There is also a possibility of reduced production from Canada, the North Sea, Latin America, and parts of Asia.
OPEC crude oil production
According to market surveys, OPEC’s crude oil production fell by 200,000 bpd in December 2015 compared to the previous month to 32.2 MMbpd (million barrels per day). Production fell due to the drop in production from Saudi Arabia, Nigeria, and Iraq.
OPEC also projects that global oil demand will average 94.2 MMbpd in 2016 compared to 92.9 MMbpd in 2015. The current global inventory in developed economies is 267 MMbbls (million barrels) more than the five-year average. OPEC’s report highlights that its demand came in at 29.7 MMbpd in 2014, rose to 29.9 MMbpd in 2015, and is expected to further rise to 31.6 MMbpd in 2016. The global economy is expected to expand by 3.4% in 2016 compared to 3% in 2015. This growth should support oil demand.
Oil prices didn’t react to the OPEC report and were lower during the last two trading sessions. Record production from OPEC will continue to put pressure on crude oil prices. Falling production from the United States and non-OPEC countries would benefit oil prices.
Higher oil prices benefit oil producers like Chevron (CVX), Murphy Oil (MUR), ExxonMobil (XOM), Occidental Petroleum (OXY), ConocoPhillips (COP), and Pioneer Natural Resources (PXD). ETFs like the United States Oil Fund (USO), the ProShares Ultra Bloomberg Crude Oil ETF (UCO), the Vanguard Energy ETF (VDE), and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO) are also influenced by volatile oil prices.
Read the next part of the series for insight from the global energy watch dog, the International Energy Agency, or IEA.