ETF Trends
ETF Trends
  • Organization of Petroleum Exporting Countries (OPEC) always looms large for oil ETFs
  • OPEC has hinted at its desire to limit production in face of the prolonged low oil environment
  • Qatar, Russia, Saudi Arabia and Venezuela have been in discussions to hold output steady at January levels, but only if other producers followed suit

The Organization of Petroleum Exporting Countries (OPEC) always looms large for oil exchange traded products, such as the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures.

That thesis will be tested again this week with OPEC meeting. In fact, it is already being proven due to the reluctance of some OPEC members to significantly scale back production in an effort to support higher oil prices.

OPEC has hinted at its desire to limit production in face of the prolonged low oil environment. However, Iran, which has just recently re-entered the global oil market, is only just starting to ramp up production, potentially putting a damper on plans for a OPEC cut.

“Oil minister Bijan Zanganeh said Iran would only join discussions to cap output after its production reached four million barrels per day,” reports the BBC. “In February, Saudi Arabia struck a deal with Russia and other Opec nations to freeze oil output at January levels. But Iran wants production to hit pre-sanction levels before beginning talks.”

Qatar, Russia, Saudi Arabia and Venezuela have been in discussions to hold output steady at January levels, but only if other producers followed suit. Russia is the largest non-OPEC producer of oil and natural gas, though the country prefers higher prices even more so than Saudi Arabia. By some estimates, Iran is OPEC’s second-largest producer behind Saudi Arabia.

Still, OPEC is doing little to limit output, according to recent data.

“In its most recent report, Opec said its output slowed marginally in February, by 175,000 barrels per day to 32.38 million, on lower production from Iraq, Nigeria and the United Arab Emirates,” reports the BBC. “Overall, it expects demand for 2016 to reach 31.5 million barrels per day, a fall of 100,000 barrels on its previous forecast, but a rise of 1.8 million barrels per day on last year.”

United States Oil Fund