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Why OPEC’s Crude Oil Production Rose in July

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OPEC’s crude oil production 

On July 30, a Reuters survey showed that OPEC’s crude oil production increased by 70,000 bpd (barrels per day) to 32.64 MMbpd in July—compared to the previous month. The rise in OPEC’s crude oil production pressured oil prices. Brent and WTI oil prices fell 1.1% and 2%, respectively, on July 31.

The iShares US Energy ETF (IYE) fell ~0.3% to $42.41 on July 31. The index is composed of US companies in the energy sector. Range Resources (RRC), Cabot Oil & Gas (COG), Gulfport Energy (GPOR), and CNX Resources (CNX) decreased 5.9%, 3.4%, 3%, and 2.8%, respectively, on July 31. These stocks were the top percentage losses in IYE’s portfolio during the same period. These stocks account for ~1.1% of IYE’s holdings.

The production increased in July due to the rise in production mainly from Kuwait, Saudi Arabia, and Iraq. Their production increased by 80,000 bpd, 50,000 bpd, and 40,000 bpd, respectively, in July. Saudi Arabia and Iraq are the top two oil producers among OPEC members.

The production declined mainly from Iran, Libya, and Venezuela in July. Their production declined by 100,000 bpd, 30,000 bpd, and 10,000 bpd, respectively. The decline from these countries wasn’t intended along the lines of self-imposed supply cuts.

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Supply cuts 

On June 22, OPEC pledged to bring the supply cut compliance back to 100% from higher levels due to unintended supply drops from member countries. OPEC’s supply cut compliance was at 111% in July—compared 116% in June.

Impact

A rise in production from OPEC could pressure oil prices. However, unexpected supply outages from Libya and Canada, sanctions on Iran, and the drop in Venezuela’s production due to mismanagement could help oil prices. Read US Natural Gas Drivers: Record Production and Low Inventories for the latest updates on crude oil and natural gas.

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