Middle East Returns to Oil Production Dominance

The Middle East is back as the world’s dominant oil-producing region, a report said Wednesday, churning out its biggest chunk of global output since the 1970s and giving OPEC an edge in its fight for market share.

The rise of American oil production from shale formations had reduced consumer reliance on Middle East crude in recent years. But a surge in production from Saudi Arabia, Iraq and Iran this year—coupled with falling shale oil output during a price slump—has changed the equation, according to the International Energy Agency’s closely watched monthly report.

Middle Eastern oil production rose to a record-high of 31.5 million barrels a day in June amid near-record supplies from Saudi Arabia, said the Paris-based agency that watched energy trends for oil-consuming nations. At the same time, U.S. oil production fell 140,000 barrels a day to 12.45 million, a number that includes very light types of oil called condensates often produced from shale.

“When U.S. shale production was moving upward very fast, it became fashionable to talk of lower reliance on traditional suppliers,” the IEA said in its closely watched monthly market report.

The rise of Middle Eastern market share to 35%, the highest since the late 1970s, is “an eloquent reminder that even when U.S. shale production does resume its growth, older producers will remain essential for oil markets,” the agency said.

The report served as another signal that the Organization of the Petroleum Exporting Countries is slowly winning back market share after a rise in American shale drilling. The IEA included non-OPEC members like Oman in its calculation of Middle East output, but the region’s comeback was driven by big OPEC members like Saudi Arabia, Iraq and Iran.

The IEA said OPEC’s output rose 400,000 barrels a day in June to an eight-year high of 33.21 million barrels. The cartel now has 14 members since Gabon joined in June.

It is partly a reflection of a change in policy at the region’s biggest oil producer, Saudi Arabia. Once the world’s swing producer, able to move prices up and down by turning its oil taps on and off, the kingdom in 2014 moved instead to defend its slice of the market in the face of plunging oil prices and growing competition from the U.S.

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