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Iran Fever: Looks Like Iranian Crude Will Flood Global Markets OPEC crude oil production changes
The EIA expects OPEC crude oil production to rise by 0.5 MMbpd in 2016. The vast majority of the increase in crude oil production should come from Iran. The removal of Western sanctions against the country should boost Iran’s crude oil production.
Non-OPEC crude oil production changes
The EIA (U.S Energy Information Administration) forecasted that non-OPEC crude oil production in 2016 would fall 0.6 MMbpd, which would be the first fall in non-OPEC crude oil production in eight years. Around 60% of this production decline in 2016 should come from the United States. The EIA also projected that US crude oil production will fall 0.4 MMbpd in 2016 and that production levels will remain stable in 2017.
Why will US production fall?
US crude oil production is highly influenced by declining rates in US tight oil production. Short-investment-horizon reactions to the price-sensitive environment bring down production levels. As the US rig count also falls, prices and massive inventory buildups could contribute to a decline in US crude oil production in 2016.
The fall in US crude oil production is a negative indication for crude oil producers. Due to lower production volumes, operational costs should rise for US crude oil producers like ConocoPhillips (COP), Apache (APA), Anadarko Petroleum (APC), and Pioneer Natural Resources (PXD).
Apache (APA) accounts for 1.4% of the Energy Select SPDR ETF (XLE).
The fall in US crude oil production should reduce transport volumes, so MLPs like Holly Energy Partners (HEP) and Genesis Energy (GEL) will likely suffer lower revenues.
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