Russia and OPEC: Key Bearish Catalysts for 2016

Crude oil production 

Russia’s energy minister reported that Russia is targeting to produce ~10.9 MMbpd (million barrels per day) of crude oil in 2016 compared to 10.7 MMbpd in 2015. It’s the highest in 30 years.

Russia’s crude oil production rose to 10.8 MMbpd in June 2016 compared to May 2016, according to the Russian Energy Ministry. For more information, read Russia’s Crude Oil Production Will Pressure the Crude Oil Market.

Russia and OPEC: Key Bearish Catalysts for 2016

OPEC’s (Organization of the Petroleum Exporting Countries) monthly report highlighted that OPEC crude oil production rose by 264,100 bpd (barrels per day) to 32.9 MMbpd in June 2016 compared to the previous month. Production rose 0.8% month-over-month and 2.6% year-over-year. Read How Will the Crude Oil Market React to OPEC’s Crude Oil Production? for more information. The expectation of a production rise should have a negative impact on crude oil prices.

OPEC’s monthly report added that Saudi Arabia’s crude oil production rose by 66,500 bpd to 10.3 MMbpd in June 2016 compared to the previous month. Market surveys project that crude oil production in Saudi Arabia could rise to 10.5 MMbpd in the short term.

OPEC’s monthly report stated that Iran’s crude oil production rose by 77,800 bpd to 3.6 MMbpd in June 2016 compared to the previous month. Iran has almost doubled its exports since early 2016.

OPEC didn’t cap its production at its meeting on June 2, 2016. The failure of the Doha meeting on April 17 also put a lid on crude oil. Read Hopes for Oil Producer Meeting Boosted Prices for Last 2 Months and Why Did the Doha Oil Producer Meeting Fail? to learn more. 

Impact on crude oil prices, producers, and ETFs 

The above bearish drivers could pressure crude oil prices. Slowing global demand after the Brexit vote are also pressuring crude oil prices.

Lower crude oil prices impact the profitability of US and international oil producers such as PetroChina (PTR) and Halcon Resources (HK). The roller coaster ride in crude oil prices also affects ETFs and ETNs such as the United States 12 Month Oil ETF (USL) and the PowerShares DWA Energy Momentum ETF (PXI).

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