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From Gusher to Trickle: A Timeline of Saudi Oil Production Cuts

Mar 12, 2019

Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions
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  • The eventful year for crude oil continues this week with Saudi Arabia supplying clients with notably less oil than requested in April, furthering an already deeper-than-expected production cut into its second month. In the last year, sentiment in oil markets has been influenced by news of US sanctions, turmoil in Venezuela, and even tweets from US President Donald Trump. In what has been a complicated year for oil markets, we are providing a brief timeline of important news and events to shake oil markets.
     
  • Saudi Arabia cut March crude oil output by 500,000 barrels/day from February levels, dragging crude oil output to under 10,000,000 barrels/day for March. With aforementioned reports that Saudi Arabia will continue its production cuts into April, Saudi Arabia crude oil output will likely hold well below 10,000,000 barrels/day in the near-term.  
     
  • Below you will find a 5-year chart depicting monthly Saudi Arabia crude oil output in terms of barrels/day.

 

Source: Bloomberg
 

  • Turbulence in crude oil markets began on June 13th, 2019 when President Donald Trump fired off a tweet, directed at OPEC, criticizing high oil prices. In his tweet, President Trump wrote, “Oil prices are too high, OPEC is at it again. Not good!”
     
  • OPEC appeared to respond positively to criticisms by President Trump, although the organization may have simply been driven purely by a desire to cool high oil prices, which were trading at elevated levels -- around the time of President Trump’s tweet, Brent Crude Oil was hovering between USD$70/bbl and USD$80/bbl. On June 22nd, 2018, Saudi-led OPEC oil cartel members voted to increase nominal output by 1 million barrels/day.  
     
  • Shortly after on June 23rd, 2018, Russia and other additional oil-producing allies announced they would support the 1 million barrel/day oil output increase.  
     
  • A few weeks following Trump’s initial tweets directed at OPEC on July 7th, 2018, Iranian Oil Minister Bijan Namdar Zanganeh accused President Trump of insulting OPEC with his comments. Zangeneh was also keen to point out that OPEC did not increase crude oil production in response to pressure by the US President.  
     
  • After crude oil prices reached highs in October 2018, the commodities price dove through November into December. From its high of USD$86.71/bbl on October 3rd, 2018, Brent Crude Oil prices fell 42% to a low of USD$50.29/bbl on December 26th, 2018.
     
  • Amid falling oil prices in the fourth quarter of 2018, President Trump urged OPEC not to slash oil production at their December meeting when he tweeted, “Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!,” on December 5th, 2018.  
     
  • OPEC did not oblige to President Trump’s desire when, on December 7th, 2018, the organization announced a crude oil production cut of 1.2 million barrels/day, beginning in January and extending for 6 months.
     
  • Further turbulence was thrown into oil markets on January 23rd, 2019 when Juan Guaido declared himself Interim President of Venezuela, one of the largest crude oil producers in the world.
     
  • On January 29th, 2019, Nicolas Maduro, the previously elected President of Venezuela (although many object that the election was corrupt) sought OPEC’s support against US sanctions imposed on the country’s domestic oil industry. OPEC did not make any formal statement regarding the request.
     
  • Despite turmoil in Venezuela and already lower crude oil production output, OPEC announced on February 12th, 2019 that it sharply reduced crude oil production in January mainly due to slashed output by Saudi Arabia.
     
  • More recently, the U.S. government cut its oil production forecast for the first time in six months as drillers scale back in smaller shale plays and the U.S. Gulf of Mexico. While crude output is still expected to reach record levels, the Energy Information Administration trimmed its 2019 forecast to 12.3 million barrels a day -- 110,000 barrels-a-day lower than it had forecast previously. In 2020, production is expected to reach 13.03 million barrels a day -- 170,000 barrels a day lower than last month’s estimate.
     
  • Investors who are bullish on the oil sector may want to consider buying oil stocks ranked as "Top Buy" in our stock models. Below, we highlight the most attractive names:
     
  • Panhandle Oil and Gas Inc. (PHX) is rated "Top Buy" in our US Micro-Cap Global Top Stock Ideas. We have highlighted Panhandle Oil and Gas Inc. several times this month as a March "Top Buy" stock research report, seen here
     
  • Royal Dutch Shell plc (ENXTAM: RDSA) is rated "Top Buy" in our European Large-Cap Global Top Stock Ideas and "Top Buy" in our United Kingdom All-Cap Global Top Stock Ideas. 
     
  • Repsol, S.A. (BME: REP) is rated "Top Buy" in our European Large-Cap Global Top Stock Ideas. 

 

Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS
Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS