Why Kuwait Is a Key Factor in the Production Freeze Talk
Kuwait Backs the Production Freeze: What Does It Mean?
Why Kuwait is important
Kuwait is an important political and economic factor in OPEC (Organization of the Petroleum Exporting Countries) and the Middle East region. Geographically, Kuwait is much smaller compared to Iran, Iraq, and Saudi Arabia. However, it accounted for about 8% of OPEC’s total production in February 2016. In February, Kuwait produced around 2.5 MMbpd (million barrels per day) of crude—0.4 MMbpd less than Iran’s crude output in the same month. The following table shows the crude oil production data for major OPEC producers. Kuwait’s crude reserves account for 6% of the global proved crude oil reserves, according to statistics from BP (BP).
Kuwait has the lowest cost of production
Data compiled by Rystad Energy in September 2015 indicate that Kuwait has the lowest cost of production per barrel of crude oil (UWTI)(DBO) among all of the crude oil producers in the world. Kuwait’s cost of production was around $8.50 per barrel. Saudi Arabia’s cost of production was around $9.90. The cost only includes operational and capital expenditure. Read What’s the Break-Even Cost for the Top Oil Exporters? to learn more about oil producers’ cost of production.
Energy ETFs and stock impacted by production freeze talk
Energy ETFs such as the S&P Equal Weight Energy ETF (RYE), the S&P Equal Weight Energy ETF (IPW), and the iShares MSCI Global Energy Producers ETF (FILL) take price cues from the production freeze talk. Exploration and production companies such as ExxonMobil (XOM), Chevron (CVX), ConocoPhillips (COP), and Anadarko Petroleum (APC) are also impacted by the above development.
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