OPEC’s crude oil production fell in February 2017
A Reuters survey estimates that OPEC (Organization of the Petroleum Exporting Countries) showed 94% compliance with targeted production cuts in February 2017 due to major producers’ production cut deal. The deal led to a fall in OPEC’s crude oil production by 30,000 bpd (barrels per day) to 32.19 MMbpd (million barrels per day) in February 2017—compared to January 2017. It helped support crude oil (USL) (ERX) (IXC) (ERY) prices and rebalance the crude oil market. Crude oil prices have risen almost 16% since November 2016 due to major producers’ production cut deal.
A Reuters survey estimated that OPEC showed 82% compliance with targeted production cuts in January 2017. The rise in compliance among OPEC members is bullish for crude oil prices. Higher crude oil prices have a positive impact on oil and gas producers’ earnings like Marathon Oil (MRO), Hess (HES), Warren Resources (WRES), and QEP Resources (QEP).
Major oil producers’ plan in the coming months
Countries like the United Arab Emirates and Iraq are expected to reduce production more in the coming months due to major producers’ production cut deal.
- OPEC agreed to reduce crude oil production by 2 MMbpd to ~32.5 MMbpd in January 2017.
- Non-OPEC producers agreed to reduce crude oil production by 0.6 MMbpd in January 2017.
Major oil producer like Saudi Arabia and Russia are reducing their production. OPEC and Russia’s compliance with major producers’ production cut deal shows that they can work together to support oil prices by cutting oil production. It could offset the rise in US crude oil production in 2017. The expectation of higher compliance among OPEC and the possible extension of major producers’ production cut deal could support oil prices in 2017.
Read the next part of the series for another bearish driver—US crude oil inventories.