4 Dec

How OPEC and Russia Are Helping US Crude Oil Producers

WRITTEN BY Gordon Kristopher

Crude oil futures 

January West Texas Intermediate (or WTI) crude oil (USO) (SCO) futures contracts fell 0.65% and were trading at $57.98 per barrel at 1:10 AM EST on December 4, 2017. In contrast, the E-Mini S&P 500 (SPY) futures contracts for December delivery rose 0.54% to 2,658.25 at the same time.

Crude oil prices fell due to a strong US dollar (UUP) in early morning trading on December 4, 2017. However, oil (USL) (UCO) futures are near their three-year high partially due to current production cuts. High oil prices help oil producers (IEZ) (XOP) like Saudi Aramco, Rosneft, BP (BP), ExxonMobil (XOM), and Shell (RDS.A).

How OPEC and Russia Are Helping US Crude Oil Producers

OPEC extends production cuts for nine months 

On November 30, 2017, OPEC and Russia extended the production cuts until December 2018. It boosted oil (BNO) (DBO) prices on December 1, 2017. According to the deal, oil producers will cut production by 1,800,000 bpd (or 2% of global oil supply) from January 2017 to December 2018. However, oil producers signaled an early exit from the deal depending on oil market conditions. Nigeria and Libya agreed to cap their crude oil production levels at their 2017 average. The production cuts aim to reduce global and US oil inventories.

US shale oil drillers 

The current production cuts could keep oil prices firm. As a result, the US and Canada’s oil producers are expected to increase their drilling budget by 20% in 2018, according to an Evercore ISI survey. They had increased the drilling budget by 40% in 2017.

Impact  

Any rise in oil prices would drive US production. US production is expected to hit a record in 2018. It would offset some of the benefits of production cuts and pressure oil prices. 

Next, we’ll discuss how the US tax bill impacts oil prices.

Latest articles

Goldman Sachs (GS) settled a lawsuit that alleged it rigged bond prices. Also, Deutsche Bank agreed to pay a fine of $15 million to settle a lawsuit.

In the November 15 premarket trading session, Amarin Corporation (AMRN) stock rose more than 7%, caused by the FDA positive decision for Vascepa.

In the November 14 trading session, Aurora Cannabis (ACB) stock fell 12.7% from the previous session during after-hours trading.

Strategy Analytics reported that Apple could lead the 5G smartphone market in 2020, outshining Samsung—the current leader in the global 5G market.

This week has been tough for the cannabis sector. Cronos Group and Canopy Growth reported lower-than-expected earnings, and the sector ETFs dropped.

Yesterday, Argus Research upgraded Uber stock from “hold” to “buy.” Let's look at Uber and Lyft’s recent analyst rating changes.