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Why OPEC’s Crude Oil Production Declined in February

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Crude oil futures 

April US crude oil futures rose 0.2% from the previous settlement and were trading at $62.68 per barrel at 1:05 AM EST on March 6, 2018.

Likewise, US oil futures contracts rose 2.2% to $62.57 per barrel on March 5, 2018. The Vanguard Energy ETF (VDE) and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) increased 1.9% and 1.3%, respectively, on March 5, 2018. These funds have exposure to energy companies.

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OPEC’s crude oil production 

A Reuters survey showed that OPEC’s crude oil production decreased by 70,000 bpd (barrels per day) to 32.28 MMbpd (million barrels per day) in February 2018—compared to the previous month. Production decreased due to lower production from the United Arab Emirates, Libya, Venezuela, and Iraq.

OPEC’s compliance with the ongoing supply cuts was at 149% in February 2018 and 144% in January 2018, respectively. Higher compliance with the supply cuts supports oil prices.

Supply cut 

Major oil producers agreed to cut crude oil production by 1,800,000 bpd from January 2017 to December 2018. Brent and US oil prices have risen ~47% since June 21, 2017, partly due to the supply cuts.

The United States Brent Oil ETF (BNO) and the United States Oil ETF (USO) follow Brent and WTI crude oil futures, respectively. BNO and USO have risen ~51% and 45%, respectively, since June 21, 2017.

Impact

OPEC’s higher compliance with supply cuts would draw down global and US oil inventories and support oil prices. Any unexpected supply outage from Libya, Iraq, and Venezuela could also support oil prices.

Next, we’ll discuss US crude oil production.

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