OPEC’s crude oil production
OPEC’s crude oil production was steady at 32.47 MMbpd (million barrels per day) in December 2017, according to a Bloomberg survey. Compliance with the ongoing output cuts was at 121% in December 2017 and November 2017.
OPEC and Russia’s production cuts
On November 30, 2017, OPEC and Russia decided to extend the production cuts until December 2018. Oil producers will cut the output by 1,800,000 bpd (or 2% of the global oil supply) from January 2017 to December 2018, according to the deal. Brent (BNO) (UCO) oil prices rose ~17% in 2017, which was partially supported by the production cuts.
Production cut exit plan
OPEC’s meeting is scheduled for June 2018. After the production cut pact expires in December 2018, if OPEC and non-OPEC producers return to full production, we could see oversupply in the oil market. So, OPEC might let non-OPEC producers like Russia exit the production cut pact. OPEC producers might slowly increase production. Saudi Arabia might act as a balancer. The production cut aims to reduce global crude oil inventories, which are expected to fall below the five-year average in 2018.
OPEC and Russia’s lower compliance with production cuts or any early exit could pressure oil prices. Any rise in crude oil production from the US, Brazil, and Canada could also pressure oil prices. However, higher compliance with the production cuts would support oil (USL) prices in 2018.
Read What Could Drive Crude Oil Prices in 2018? and Will US Natural Gas Futures Start 2018 on a Positive Note? for updates on oil and gas.