Oil production from the Middle East has climbed to a record while U.S. output slumps, the International Energy Agency said, in a sign that OPEC’s strategy of defending market share is succeeding.
Middle Eastern output exceeded 31 million barrels a day for a third month in June amid near-record supply from Saudi Arabia, while U.S. oil production slid 140,000 barrels a day to 12.45 million, the Paris-based agency said in its monthly market report. The IEA, which mostly kept forecasts for supply and demand unchanged, said that while the re-balancing of global oil markets is progressing, record-high inventories remain “a threat to the recent stability of oil prices.”
“When U.S. shale production was moving upwards very fast it became fashionable to talk of lower reliance on traditional suppliers,” the 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.”
Oil has recovered more than 70 percent from the 12-year low reached in January as Saudi Arabia’s strategy to pressure OPEC’s rivals succeeds in reversing the U.S. shale oil boom. Elevated output from the Middle East pushed the region’s share of world supplies to 35 percent, the highest since the late 1970s, according to the IEA.
Production from the Organization of Petroleum Exporting Countries climbed to an eight-year high last month, boosted by the re-admission of Gabon, which swelled the number of members to 14, the IEA said. The group’s crude output rose 400,000 barrels a day to 33.21 million a day as Saudi Arabia boosted production to meet peak domestic demand during the summer and as Iran continued its export recovery following the end of international sanctions in January.
Not all of OPEC’s members have reaped the benefits of the Saudi-led market strategy. Venezuela’s crude production sank to a 13-year low of 2.18 million barrels a day last month as an economic crisis triggered by the oil-price rout weighed on the country’s petroleum industry.
In the United States, crude production retreated by 220,000 barrels to 8.9 million a day in April, the most recent month for which comprehensive data is available, the IEA said. That was the biggest drop since 2008 as the two-year price slump depressed investment and drilling activity. Output from all countries outside OPEC will tumble by 900,000 barrels a day this year, the largest decline since 1992, before recovering by 200,000 barrels a day in 2017, the agency predicted.
The agency made few changes to its forecasts, raising estimates for global oil demand this year and next by 100,000 barrels a day amid resilient fuel consumption in Europe. The world growth rate for 2017 remains unchanged, with demand seen rising 1.3 percent to 97.4 million barrels a day.
While supply and demand were mostly in balance in the second quarter, bloated stockpiles “remain a dampener on oil prices,” according to the report. Oil inventories in industrialized nations climbed to an all-time high of more than 3 billion barrels in May, while the volume of crude being hoarded on tankers at sea has reached the highest level since 2009, the IEA estimated.
“The modest fall back in oil prices in recent days to closer to $45 a barrel is a reminder that the road ahead is far from smooth,” the agency said.