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Nigeria, Canada, OPEC, and Negative Crude Oil Price Drivers

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Jun. 30 2016, Updated 3:07 p.m. ET

Bearish crude oil price catalysts

In the previous three parts of this series, we covered bullish catalysts for crude oil prices. Now, let’s look at some important bearish drivers for crude oil prices in 2016.

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Bearish drivers for crude oil prices  

  • Bloomberg reported that Nigeria’s crude oil production rose from 1.3 MMbpd (million barrels per day) in early June 2016 to 1.9 MMbpd by the end of June 2016 as per Nigerian government sources. Nigerian crude oil production fell due to rebel attacks on oil pipelines and infrastructure. Nigeria targets production of 2.2 MMbpd in July 2016 if pipeline repairs are completed.
  • Restarting crude oil production in Canada after a wildfire should negatively impact crude oil prices. Secondly, the Canadian Association of Petroleum Producers projected that Canada’s crude oil production could hit 4.9 MMbpd by 2030 compared to 3.8 MMbpd in 2015.

  • OPEC’s (the Organization of the Petroleum Exporting Countries) crude oil production fell by 0.1 MMbpd (million barrels per day) to 32.3 MMbpd in May 2016 from April 2016 as per OPEC’s latest monthly report. Production fell 0.3% month-over-month. However, OPEC’s crude oil production is close to peak levels. The U.S. Energy Information Administration expects June 2016 production to rise to 32.7 MMbpd. The expectation of a rise in production should have a negative impact on crude oil prices. For more on OPEC’s production strategy, read OPEC’s Crude Oil Production Fell Marginally in May 2016.
  • Saudi Arabia’s crude oil production rose by 84,000 bpd (barrels per day) to 10.24 MMbpd in May 2016—compared to April 2016 as per OPEC’s latest monthly report. Production rose 1% month-over-month. Market surveys project that crude oil production in Saudi Arabia could rise to 10.5 MMbpd in the short term. To learn more, read Saudi Arabia’s Crude Oil Production Rose in May 2016.
  • Iran’s crude oil production rose by 89,200 bpd to 3.56 MMbpd in May 2016 compared to April 2016 as per OPEC’s latest monthly report. Iran almost doubled its exports since early 2016. Read Why Did Iran’s Crude Oil Production Rise in May 2016? to learn more.
  • OPEC didn’t cap its production at its meeting on June 2. The failure of the Doha meeting on April 17 also put a lid on crude oil prices. Read Hopes for Oil Producer Meeting Boosted Prices for Last 2 Months and Why Did the Doha Oil Producer Meeting Fail? to learn more.
  • Global crude oil and product inventories exceed 3 billion barrels. To learn more, read How Global Crude Oil Inventory Will Limit the Upside for Crude Oil. US crude oil inventories are 14.6% higher than the corresponding period in 2015. For more on US crude oil inventories, read the next part of this series.

Impact on crude oil producers and ETFs  

Bearish catalysts should pressure crude oil prices. Lower crude oil prices impact US and international oil producers’ margins—including PetroChina (PTR), CNOOC (CEO), and Halcon Resources (HK). The uncertainty in crude oil prices also impacts ETFs and ETNs such as the United States 12 Month Oil ETF (USL), the Vanguard Energy ETF (VDE), and the United States Brent Oil ETF (BNO).

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