OPEC’s Crude Oil Production Could Rebalance the Oil Market


Nov. 20 2020, Updated 2:47 p.m. ET

OPEC’s crude oil production fell in March 2017  

A Reuters survey estimates that OPEC (Organization of the Petroleum Exporting Countries) showed 95% compliance with targeted production cuts in March 2017 due to major producers’ production cut deal. The deal led to a fall in OPEC’s crude oil production by 230,000 bpd (barrels per day) to 32.01 MMbpd (million barrels per day) in March 2017—compared to the previous month. It supported crude oil (SCO) (IXC) (FXN) prices to almost a one-month high on March 31, 2017. Crude oil prices have risen almost 20% since November 2016 and February 2017 due to major producers’ production cut deal.

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A Reuters survey estimated that OPEC showed 82% and 94% compliance with targeted production cuts in January 2017 and February 2017. Higher compliance among OPEC members is bullish for crude oil prices. High crude oil prices have a positive impact on oil and gas producers’ earnings like Northern Oil & Gas (NOG), ExxonMobil (XOM), Stone Energy (SGY), and Hess (HES).

Major oil producers’ plan in the coming months

Six OPEC members and Oman expressed interest in extending major producers’ production cut deal in 2H17. The deal is expected to remove surplus oil from the oil market. Major producers’ production cut deal would help rebalance the oil market.

Angola, Kuwait, Qatar, the United Arab Emirates, and Iraq reached 181%, 105%, 93%, 81%, and 67% of their targeted production cuts, according to Reuters surveys in March 2017. These countries are expected to reduce production more in the coming months due to major producers’ production cut deal.

Saudi Arabia’s larger-than-expected production cuts in January 2017 and February 2017 already supported oil prices. Its production rose by 80,000 bpd to 9.98 MMbpd in March 2017—compared to the previous month. Saudi Arabia said it would extend the deal if global crude oil inventories stayed above the five-year average.

The expectation of higher OPEC compliance and the possible extension of major producers’ production cut deal could support oil prices in 2017. US crude oil (XLE) (XOP) prices are seeing key resistance levels around $52 per barrel despite OPEC’s massive production cuts. Will Russia help crude oil bulls?

In the next part, we’ll analyze Russia’s crude oil production.


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