Will Russia Support OPEC if Production Cuts Continue?

Russia’s crude oil production 

On April 28, 2017, the Ministry of Energy of Russia reported that the country’s oil production fell 300,000 bpd (barrels per day) to meet the targeted production cut in April 2017.

Russia is the largest crude oil producer in the world. Its oil production fell 50,000 bpd to ~11.1 MMbpd (million barrels per day) in March 2017 compared to the previous month. Russia’s record compliance with the major oil producers’ production cut deal is bullish for crude oil (IXC) (IYE) (FXN) (XOP) prices.

Higher crude oil prices have a positive impact on crude oil and the earnings of gas producers such as Occidental Petroleum (OXY), Warren Resources (WRES), and Northern Oil & Gas (NOG). For more on crude oil prices, read Part 1 of this series.

Will Russia Support OPEC if Production Cuts Continue?

Russia’s crude oil production estimates in 2017 

Russia’s crude oil production averaged ~11.0 MMbpd in 2016, the highest level in the last 30 years. Market surveys estimate that Russia’s crude oil production will rise 170,000 bpd to average 11.14 MMbpd in 2017.

Russia and the major oil producers’ deal 

OPEC’s (Organization of the Petroleum Exporting Countries) next meeting will be on May 25, 2017. The meeting will be the driving force for oil in the next two months. However, Russia hasn’t shown any interest in extending the production cut deal in the second half of 2017.

Russia supported the deal in the first half of 2017. Its crude oil production usually falls in the first half of the year and ramps up in the second half of the year.

A Reuters poll estimates that Russia’s crude oil production will hit new highs in the second half of 2017 after the production cut deal expires in June 2017. However, the possibility of an extension of the deal could support oil (BNO) (IEZ) prices. Russia’s energy minister said it’s too early to comment about extending the deal. For more on this, read the previous part of this series.

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