Daily Management Review

Saudi Arabia is now leading the world's oil production


09/13/2016


Saudi Arabia elbowed the United States from position of the largest oil-producing country in the world, says report of the International Energy Agency. Expected balance of global oil market has been delayed, the agency warned.



Saudi Arabia managed to outflank US oil production. Since May, daily production of the Arab countries increased by 400 ths. barrels, while the United States’ figure during the same period dropped to 460 th. barrels. This is stated in a report of the International energy agency (IEA), published on September 13. According to the agency, oil production in Saudi Arabia in August amounted to 10.6 million barrels per day.

Thanks to the so-called shale boom, the US has kept the first place in oil production since April 2014, Bloomberg notes. Decline in American production took place due to a nose-dive in number of working rigs. According to by Baker Huges, it fell to a record low (404) in May. At the beginning of September, it has grown to 508.

According to the US Energy Information Administration (EIA), crude oil production in the US in August averaged just over 8.5 million barrels per day. Taking into account production of other liquids, the figure was 12.2 million barrels per day, according to the IEA report.

IEA notes in its forecast that balance of supply and demand in the world oil market has been delayed. According to the agency’s forecast, a proposal exceeds demand at least in the first half of 2017. Thus, 2017 will be the fourth consecutive year when the oil market supply is exceeding demand. The IEA lowered its forecast for world oil demand in 2016 to 96.1 million barrels. The agency says that in the third quarter of 2016, oil demand growth will slow to a two-year low (0.8 bbl. a day) due to lower demand in China and India. In 2017, global oil demand is projected at 97.3 million barrels per day.

The organization notes that effect of reduced oil production outside OPEC is neutralized by record levels of production in the cartel (33.47 million bbl. a day) due to high production rates in Saudi Arabia, Kuwait and the UAE. It has to be noted that capacity of production in Iran has reached the pre-sanctions period.

Reaction of the markets on the IEA’s report was quite considerable. Quotes of Brent crude oil fell from $ 47.87 to 47.35 per barrel, WTI crude oil - from $ 45.70 to 45.16.

Oil-producing countries are still trying to agree on the level of oil production freeze. The most serious attempt was made in mid-April in the Qatari capital Doha. The meeting was attended by both members of OPEC and oil-producing countries outside the cartel. However then, the talks failed because of Iran’s unwillingness to bottle up oil production lower than pre-sanctions indicators.

A new attempt to negotiate the production freeze is expected to be made on the sidelines of the International Energy Forum, which will take place on 26-28 September in Algeria. Heads of the Ministries of Energy of Saudi Arabia, Iraq, Iran have already confirmed their consent to participate in the talks. 

source: bloomberg.com






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