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Will Russia’s Crude Oil Production Impact Crude Oil Prices?

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Russia’s crude oil production 

Russia is the largest crude oil producer in the world. Russia’s Energy Ministry reported that its crude oil production was flat at 11.1 MMbpd (million barrels per day) in February 2017—compared to the previous month.

Russia’s crude oil production fell by ~117,000 bpd (barrels per day) to 11.1 MMbpd in January 2017—compared to December 2016 due to major producers’ production cut deal. Russia cut its production by 300,000 bpd as part of major producers’ production cut deal. Lower compliance by Russia, despite major producers’ production cut deal, is bearish for crude oil (BNO) (XES) (IEZ) (IYE) prices.

Lower crude oil prices have a negative impact on crude oil and gas producers’ earnings like Synergy Resources (SYRG), Carrizo Oil & Gas (CRZO), Continental Resources (CLR), and Sanchez Energy (SN). For more on crude oil prices, read Part 1 of the series.

Russia’s crude oil production estimates in 2017 

The EIA (U.S. Energy Information Administration) estimates that Russia’s oil production fell by 10,000 bpd to 11.35 MMbpd in January 2017—compared to December 2016.

Russia’s crude oil production peaked at 11.41 MMbpd during the Soviet Era in 1988. Russia’s crude oil production averaged ~10.97 MMbpd in 2016—the highest level in the last 30 years. Market surveys estimate that Russia’s crude oil production will rise by 170,000 bpd to average 11.14 MMbpd in 2017. The EIA estimates that Russia’s crude oil and other liquid production will average 11.30 MMbpd and 11.38 MMbpd in 2017 and 2018, respectively.

Impact on crude oil prices, stocks, and ETFs 

Russia showed its commitment to the deal by cutting its production in January 2017. If Russia increases its production cut in March 2017 and the following months, it could support crude oil prices. We could even see US crude oil prices breaching the key resistance level of $54 per barrel. A Reuters poll estimates that Russia’s crude oil production will hit new highs in 2H17 after major oil producers’ production cut deal expires in June 2017. However, the possibility of an extension of the deal could support oil prices.

Next, we’ll analyze monthly US crude oil production in December 2016.

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