Could Russia’s Crude Oil Production Help Crude Oil Bulls?



Russia’s crude oil production  

Russia is the largest crude oil producer in the world. Russia’s Energy Ministry reported that its oil production fell by 50,000 bpd (barrels per day) to 11.05 MMbpd (million barrels per day) in March 2017—compared to the previous month.

Russia’s crude oil production is down ~179,000 bpd (barrels per day) from 11.23 MMbpd in October 2016 due to major producers’ production cut deal. Russia plans to cut its production by 300,000 bpd by end of April 2017 as part of the deal. High compliance by Russia with major producers’ production cut deal is bullish for crude oil (IXC) (UCO) (XLE) (RYE) prices.

Higher crude oil prices have a positive impact on crude oil and gas producers’ earnings like Continental Resources (CLR), Occidental Petroleum (OXY), PDC Energy (PDCE), and Cobalt International Energy (CIE). For more on crude oil prices, read Part 1 of the series.

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Russia’s crude oil production estimates in 2017  

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 (U.S. Energy Information Administration) 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 

Russia showed its commitment to the deal by cutting its production from January 2017. If Russia increases its production cut in the following months, it could support crude oil prices. We could even see US crude oil prices breaching the key resistance level of $52 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 (USO) (XOP) prices. On March 25, 2017, Russia’s energy minister said that it’s too early to comment about extending major producers’ production cut deal. For more, read the previous part of the series.

Next, we’ll analyze monthly US crude oil production in January 2017.


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