The Middle East is winning back the market share as OPEC’s strategy to raise oil output is working. Oil output from the Middle East rose to a record high while output in U.S. slumps, the International Energy Agency said on Wednesday.
The oil production from Middle Eastern climbed to a record-high of 31.5 million barrels a day in June. This is the third consecutive month that the output exceeded 31 million barrels a day. At the same time, U.S. oil production fell 140,000 barrels a day to 12.45 million, the Paris-based agency said in its monthly market report.
The Middle East had lost some market shares to American after the U.S. shale oil boom. But the situation had changed this year after Saudi Arabia’s strategy to raise production to pressure OPEC’s rivals. A surge output from Saudi Arabia, Iraq and Iran pushed down the oil price and small shale oil company cannot make profit. The Middle East share of world supplies to 35 percent, the highest since the late 1970s, according to the IEA.
“When U.S. shale production was moving upwards very fast it became fashionable to talk of lower reliance on traditional suppliers,” IEA said. The Middle East’s resurgence is “an eloquent reminder that even when U.S. shale production does resume its growth, older producers will remain essential for oil markets.”
The IEA also warned that global oil demand is ebbing, while the oil inventories remain at “elevated levels”.
“After the drama we saw at the beginning of this year when prices were sliding daily, the fact that crude oil has in the past two months moved within a range in the high $40s per barrel should be a relief for some producers. For some time now this Report has signaled a return to balance as being the big picture direction in which the market is heading,” the IEA said.