OPEC’s crude oil production
OPEC’s (Organization of the Petroleum Exporting Countries) crude oil production fell by 79,000 bpd (barrels per day) to 33.1 MMbpd (million barrels per day) in February 2016 compared to January 2016. OPEC’s crude oil production fell due to the decline in crude oil production from OPEC members like Nigeria and Iraq. Saudi Arabia, OPEC’s kingpin, kept its crude oil production at January 2016 levels, as we discussed in the previous part of this series.
OPEC crude oil production estimates
The EIA (U.S. Energy Information Administration) estimates that OPEC’s crude oil production could average around 32.3 MMbpd in 2016. This could rise marginally to 32.9 MMbpd in 2017. OPEC’s crude oil production averaged 31.6 MMbpd in 2015. Thus, OPEC could successfully regain its market share with slowing US crude oil production. OPEC’s surplus production capacity is expected to decline from 1.9 MMbpd in 2016 to 1.7 MMbpd in 2017.
OPEC members’ crude oil production
Iraq’s crude oil production fell by 125,000 bpd to 4.4 MMbpd in February 2016 compared to the previous month. Iraq is OPEC’s second-largest oil producer after Saudi Arabia. In January 2016, it produced 4.5 MMbpd of crude oil, its highest level since 1989.
Iran’s crude oil production rose by 140,000 bpd to 3 MMbpd in February 2016. This was Iran’s highest production level since July 2012. The lifting of Western oil sanctions boosted Iran’s crude oil production. Iran is pumping at record levels to regain market share lost to Saudi Arabia and Iraq due to oil sanctions.
Nigeria’s crude oil production fell by 139,000 bpd to 1.9 MMbpd in February 2016. The country’s output fell due to political uncertainty and oil theft in the key oil-producing regions.
OPEC’s slowing crude oil production as a result of the production freeze could support crude oil prices in the short term. However, in order to see higher oil prices, OPEC must go beyond the production freeze and actually cut production, which seems far away as it would give breathing room to struggling US shale crude oil producers.
The record-low crude oil prices negatively affect the profitability of oil producers like Anadarko Petroleum (APC), Statoil (STO), Halcón Resources (HK), PetroChina (PTR), and Petróleo Brasileiro Petrobas (PBR).
ETFs such as the VanEck Vectors Oil Refiners ETF (CRAK), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the First Trust Energy AlphaDEX Fund (FXN), the Direxion Daily Energy Bull 3x Shares ETF (ERX), and the Vanguard Energy ETF (VDE) are also influenced by rises and falls in crude oil prices.
Read the next part of this series to learn how the global GDP (gross domestic product) could affect crude oil prices.