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OPEC and Russia: More Negative Forces for Crude Oil Market

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Nov. 20 2020, Updated 4:16 p.m. ET

Crude production

  • The EIA (U.S. Energy Information Administration) reported that OPEC’s (Organization of the Petroleum Exporting Countries) crude oil production rose by 510,000 bpd (barrels per day) to 32.7 MMbpd (million barrels per day) in June 2016, compared to the previous month. Production rose 1.5% month-over-month and by 2% year-over-year. Read How Will the Crude Oil Market React to OPEC’s Crude Oil Production? for more information. The EIA estimates that OPEC’s production will rise to 32.9 MMbpd in July 2016. The expectation of a rise in production should have a negative impact on crude oil prices.
  • The EIA reported that Saudi Arabia’s crude oil production rose by 50,000 bpd to 10.4 MMbpd in June 2016, compared to the previous month. Industry surveys project that crude oil production in Saudi Arabia could rise to 10.5 MMbpd in the short term.
  • The EIA added that Iran’s crude oil production rose by 50,000 bpd to 3.7 MMbpd in June 2016 compared to May 2016. Iran almost doubled its exports since early 2016.
  • Russia’s crude oil production rose to 10.8 MMbpd in June 2016, compared to the previous month, according to the Russian Energy Ministry. For more, read Russia’s Crude Oil Production Will Pressure the Crude Oil Market.
  • 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.
  • For the week ending July 1, 2016, US crude oil inventories are 12.5% more than the corresponding period in 2015. For more on US crude oil inventories, read the second part of this series. To learn more, read How Global Crude Oil Inventory Will Limit the Upside for Crude Oil.
  • The refined products glut, the strong dollar, and the slowing global demand after the Brexit vote will also pressure crude oil prices.
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Impact on crude oil prices, producers, and ETFs 

All of these bearish drivers could pressure crude oil prices. In its 2016 annual outlook, ExxonMobil (XOM) stated energy efficiency measures could curb global oil demand growth in the coming years.

Multiyear low crude oil prices affect US and international oil producers’ margins including PetroChina (PTR), CNOOC (CEO), Comstock Resources (CRK), and Halcon Resources (HK). The uncertainty in crude oil prices also affects ETFs and ETNs such as the United States 12 Month Oil ETF (USL), the DB Crude Oil Double Short ETN (DTO), and the Vanguard Energy ETF (VDE).

For ongoing analysis, visit Market Realist’s Upstream Oil and Gas page.

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