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OPEC Crude Oil Production: Bearish Catalyst for the Oil Market

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Jan. 6 2016, Updated 8:30 a.m. ET

OPEC crude oil production 

OPEC‘s (Organization of the Petroleum Exporting Countries) crude oil production rose by 18,000 bpd (barrels per data) to 32.1 MMbpd (million barrels per day) in December 2015 compared to November 2015 as per the preliminary estimates from Bloomberg. However, estimates by Reuters suggest that OPEC crude oil production fell by 20,000 bpd to 31.6 MMbpd in December 2015 compared with the prior month. OPEC production was at 31.8 in November 2015. These production levels are close to peak production levels.

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OPEC crude oil production: Member nations 

OPEC‘s kingpin Saudi Arabia produced 10.3 MMbpd crude oil in December 2015. The tussle for market share is driving Saudi Arabia to produce more despite the catastrophic fall in crude oil prices. The country is also producing more to offset lower crude oil prices. You can read War of Words: How Saudi Arabia and Iran Could Affect Oil Prices for more on that.

OPEC abandoned its collective production output target in its December 4, 2015, meeting. It suggests that OPEC members will produce at record levels. This would result in price wars, and all the high-cost operators might have to shut down due to lower oil prices. OPEC also has the lowest break-even costs and production costs. Low operating costs encourage OPEC to produce oil at record levels. It would affect high-cost US shale producers like Whiting Petroleum (WLL) and Continental Resources (CLR).

Iraq’s production rose by 119,000 bpd to 4.4 MMbpd in December 2015 compared with the previous month. The surge in export boosted Iraq’s production as per Bloomberg estimates. This is the highest production level since 1989. Iraq is the second largest producer of crude oil among the OPEC members.

Iran’s production fell by 100,000 bpd to 2.7 MMbpd in December 2015 compared with the previous month. To know more, refer to How Iran’s Crude Oil Production Could Ruin the Crude Oil Market.

The volatility in the oil market affects oil producers like ExxonMobil (XOM), PetroChina (PTR), Royal Dutch Shell (RDS.A), ConocoPhillips (COP), Total (TOT), and Chevron (CVX). It also affects ETFs like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the iShares US Oil & Gas Exploration & Production ETF (IEO), and the PowerShares DWA Energy Momentum Portfolio (PXI).

See how OPEC member Libya is affected by the Islamic State in the next part of the series.

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