Russia’s crude oil production
Russia’s crude oil output increased by 0.82% or 90,000 bpd (barrels per day) to 11, 060,000 bpd in June—compared to the previous month. The production rose above 11 million bpd for the first time since April 2017. Russia’s oil output has increased ahead of the adjustment of the self-imposed supply cuts.
The news of a rise in production from Russia pressured oil prices on July 2. Brent and WTI oil prices fell 2.7% and 0.3%, respectively, on the same day. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) fell ~2% on July 2. XOP follows the S&P Oil & Gas Exploration & Production Select Industry Index. Halcon Resources (HK), Ultra Petroleum (UPL), Kosmos Energy (KOS), and Centennial Resource Development (CDEV) fell 7.3%, 6.1%, 5%, and 4.7%, respectively, on July 2. These stocks were some of the top percentage losses in XOP’s portfolio during this period. These stocks account for 4% of XOP’s holdings.
Russia and production cuts
On November 30, 2017, Russia and OPEC decided to extend the current self-imposed supply cuts until December 2018. Russia agreed to cut its production by 300,000 bpd (barrels per day) as part of the production cut deal. Brent and US oil prices have risen ~73% and ~74% since June 21, 2017, partly due to the current supply cuts.
On June 22, OPEC producers and Russia agreed to increase the production starting in July to bring the production cut compliance back to 100% from higher levels due to unexpected supply drops from member countries.
Russia’s oil production has increased ~81.3% from 6,100,000 bpd in 1999. According to Russia’s energy ministry, the country could increase its production at least by 300,000 bpd as quickly as possible. Russia’s crude oil export schedule suggests that supplies could rise in July. A rise in the supplies could pressure oil prices.
Next, we’ll discuss US crude oil production.