Did Russia Follow the New Crude Oil Production Deal?


Mar. 8 2016, Updated 2:23 p.m. ET

Russia crude oil production 

The Russian Energy Ministry reported that Russia produced 10.88 MMbpd (million barrels per day) of crude oil in February 2016. Russia’s crude oil production was at 10.989 MMbpd in January 2016. This suggests that Russia followed the crude oil production deal. We covered this in Part 2 of this series.

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Russia’s economy depends on the revenue from oil exports. The collateral damage of oil prices since June 2014 impacted Russia’s income. Low oil prices also impacted large Russian oil and gas operators like the Gazprom PAO (OGZPY), Lukoil (LUKOY), and Tatneft (OAOFY). The low prices impact US oil producers’ revenue like Energy XXI (EXXI) and Carrizo Oil & Gas (CRZO). Russia has been producing oil at record levels to offset lower oil prices and retain its market share.

The rising tax on Russian oil producers from the Russian government will continue to pressure Russian oil producers due to lower oil prices. In contrast, the depreciating ruble will support oil exporters with greater ruble revenue. Overall, the oil downtrend will continue to put pressure on Russian upstream players. So, Russia is forced to produce more. The meeting on March 20, 2016, could reach a conclusion about cutting back the production from Russia and Saudi Arabia. You can read more about this in Part 2 of this series.


ETFs and ETNs such as the iShares Global Energy ETF (IXC), the VelocityShares 3x Inverse Crude Oil ETN (DWTI), the VelocityShares 3x Long Crude Oil ETN (UWTI), the Direxion Daily Energy Bull 3x Shares ETF (ERX), the Vanguard Energy ETF (VDE), and the iShares U.S. Energy ETF (IYE) are also influenced by the ups and downs in the oil and gas market.

Read more about the crude oil supply and demand gap in the next part of the series.


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