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OPEC’s Crude Oil Production Declined in March 2018

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OPEC’s crude oil production 

A Reuters survey showed that OPEC’s crude oil production declined by 90,000 bpd (barrels per day) to 32.19 MMbpd (million barrels per day) in March 2018—compared to February 2018. OPEC’s production was at an 11-month low. OPEC’s production declined due to lower production from Angola, Libya, Venezuela, and Saudi Arabia.

Angola and Libya’s production declined by 90,000 bpd and 60,000 bpd, respectively, in March 2018—compared to February 2018. These countries had the highest production decline among OPEC members during this period. Iran, Iraq, and Qatar’s production rose by 10,000 bpd, 20,000 bpd, and 30,000 bpd, respectively, in March 2018.

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Supply cuts 

OPEC and Russia decided to curb oil production by 1,800,000 bpd from January 2017 to December 2018. Brent and US oil prices have risen ~53% and ~49% since June 21, 2017, partly due to ongoing supply cuts.

The United States Brent Oil ETF (BNO) and the United States Oil ETF (USO) aim to follow the performance of active Brent and US crude oil futures contracts, respectively. BNO and USO have risen ~58.6% and 46.6%, respectively, since June 21, 2017.

The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the Energy Select Sector SPDR ETF (XLE) have increased ~15.7% and ~8.6%, respectively, since June 21, 2017. XOP aims to follow the performance of the S&P Oil & Gas Exploration & Production Select Industry Index. XLE aims to follow the performance of the Energy Select Sector Index.

Impact

On March 26, 2018, Saudi Arabia’s crown prince said that Saudi Arabia and Russia are working together on a long-term supply cut strategy. On April 6, 2018, the Russian energy minister said that Russia and OPEC could set up an indefinite supply management strategy after the ongoing supply cuts expire in December 2018.

OPEC had 159% and 154% compliance with production cuts in March 2018 and February 2018, respectively. OPEC’s higher compliance with supply cuts could draw down global crude oil inventories, which could support oil prices. Another supply cut extension in 2019 could also support oil prices. An unexpected supply outage from Iraq, Libya, and Venezuela could benefit oil prices.

Next, we’ll discuss Iraq’s crude oil production.

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