IEA concerned with rising Middle East market share
OREANDA-NEWS. September 15, 2016. The IEA acknowledges the "central role" of the Middle East in supplying global markets with oil, but the region's rising market share at the expense of other parts of the world is causing some concerns.
The market share and output of Middle Eastern producers is growing "very strongly", hitting levels unseen since the 1970s, executive director Fatih Birol said today. While there are "many reliable producers in that region", getting oil supplies from different parts of the world is important, he said.
"We would like to see a more diverse profile of production, and concentration of production is something we are not in favour of."
Shrinking market shares of producers in the Americas, Africa and Asia-Pacific is not welcome news in terms of diversification, Birol said. But he also stressed the importance of the Middle East for global supplies, as "the bulk of reserves — and the cheapest reserves — are in the Middle East".
Upstream oil and gas investment has shrunk significantly since oil prices started falling in 2014, but the Middle East and Russia have proven to be "the most resilient regions", with the former largely because of the low cost of its output and the latter because of a weaker national currency, the IEA said today in its World Energy Investment report.
Saudi Arabia's August output remained close to July's record high of 10.67mn b/d, according to Opec's Monthly Oil Market Report (MOMR) released this week. Opec's production — calculated by Argus using data submitted to the Opec secretariat by member governments and Argus' data for Algeria, Gabon and Libya, none of which submitted figures for the Opec report — puts the group's production in August at 34.18mn b/d, compared with Opec's projected 2016 call on its crude of 31.7mn b/d.
Opec and, possibly, some non-Opec members are expected to hold an informal meeting on the sidelines of the International Energy Forum (IEF) summit in Algiers in two weeks, where some will call for an output freeze. Birol said he will be in Algeria, to meet with ministers from producing and consuming countries.
When asked about the informal Opec meeting, Birol said: "I have full trust that they will be taking decisions which are in line with the responsible role they have played up to know, and I hope to see that this role, this position will continue in the years to come".
Birol said the future role of Opec will be decided by the market, as the emergence of unconventional oil brought a lot of new supply to the market, while providing a lot of flexibility in the oil market and increasing choices for consumers. "The situation is very different now than it was several years ago," he said.
Birol said the IEA will continue to work closely with Opec and exchange information and views, "even though we may have different perceptions about market developments".