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Did Saudi Arabia Keep Its Word and Freeze Crude Oil Production?

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Mar. 1 2016, Updated 8:08 a.m. ET

Saudi Arabia crude oil production

Saudi Arabia is the top oil producer of OPEC (Organization of the Petroleum Exporting Countries) and the largest crude oil exporter in the world. The latest data from Bloomberg suggest that Saudi Arabia’s crude oil production in February 2016 was 10.2 MMbpd (million barrels per day), the same as in January 2016. Saudi Arabia maintained its crude oil production level in accordance with its deal with Russia, Venezuela, and Qatar to freeze production at January 2016 levels. To learn more about the historic deal, read Why Crude Oil Prices Fell despite the OPEC and Non-OPEC Deal. Saudi Arabian crude oil production peaked at 10.6 MMbpd in June 2015.

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Saudi Arabian production and US imports

From 2012 to 2015, US crude oil production increased to record levels. This led to the decline in US imports of Saudi Arabian crude oil. The resulting tussle for market share led to overproduction in 2014 and 2015, which led to the drastic fall of crude oil prices. Crude oil prices fell 70% and hit 12-year lows. Hence, Saudi Arabian crude oil production levels are vital for the crude oil market. Any decision to increase or decrease crude oil production has a vital impact on crude oil prices. Read more about OPEC’s crude oil production in the next part of this series.

Record-low crude oil prices negatively affect the profitability of domestic and international oil companies like Total (TOT), Chevron (CVX), Royal Dutch Shell (RDS.A), Saudi Aramco, ExxonMobil (XOM), and BP (BP). However, they benefit oil refiners like Valero Energy Corporation (VLO), Tesoro (TSO), and Northern Tier Energy (NTI).

ETFs and ETNs such as the iShares Global Energy ETF (IXC), the VelocityShares 3x Inverse Crude Oil ETN (DWTI), the Vanguard Energy ETF (VDE), and the iShares U.S. Energy ETF (IYE) are also influenced by the uncertainty in oil prices.

In the next part of this series, we’ll look at the latest crude oil production figures for OPEC.

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