Gulf states are producing more oil despite the U.S.’s shale revolution that threatened their grip on the oil market, reported the Financial Times on Monday.
Within the next year, the U.S. is poised to overtake Russia as the world’s second-biggest oil producer after Saudi Arabia, this is thanks to the shale revolution. According to the International Energy Agency, U.S crude oil production has increased by 50 per cent since 2008.
Production in North America is expected to encroach upon OPEC’s oil market, reported the Financial Times.
However, so far the Gulf states that currently dominate the market have remained unaffected, actually expanding their share of the market. Countries including Saudi Arabia, Kuwait, the United Arab Emirates and Qatar set aggregate production records in each of the last three months, according to fresh estimates from the International Energy Agency. In September, they accounted for 18 per cent of global demand – a level only matched twice in IEA data stretching back to the 1980s.
“Despite the shale revolution, the Middle East is and will remain the heart of global oil industry for some time to come,”Fatih Birol, the IEA’s chief economist, told the Financial Times.
There is a key difference between the U.S. and the Gulf states, according to the Financial Times. U.S. companies, states the report, “tend to maximize production to generate more profits, the Gulf states – and Saudi Arabia in particular – invest heavily to maintain spare capacity.”
As a result, Gulf states are capturing a greater share of the fast growing Asian market.
The output has provided a windfall for the oil-dependent monarchies in the Gulf region. The production of 16.4m barrels per day by the four states during the third quarter of 2013 was worth more than $150 billion. Beneficiaries of the windfall include Saudi Arabia, the UAE and Kuwait.
Ultimately, this means that the region continues to be a crucial player in the market, positively affecting its relationship with the international community, according to the Financial Times.