Middle East oil supply has reached “historically high levels”, according to the latest analysis from the IEA, as the current oil price environment has boosted the share of oil produced in the region
The latest data points out that Middle East oil supply exceeds 31mn bpd, and the region now accounts for 35 per cent of global oil supplies, the highest level since 1975. “This growth in production, from Saudi Arabia, Iraq and Iran, highlights the fact that low-cost producers in the Middle East remain central to oil markets,” comments the IEA. “Production from the Middle East is expected to account for most of the world’s demand growth this year.”
In its June monthly oil report, the IEA pointed out that Iran has emerged as OPEC's fastest source of supply growth this year, with an anticipated gain of 700,000 bpd.
Following up on the World Energy Outlook 2015, which examined the potential impact of a prolonged period of lower oil prices on energy markets, the updated analysis from the IEA confirms that the current oil price environment has also had a negative impact on oil investments and energy efficiency. Investments in the oil sector declined in 2015, and then again in 2016, the first consecutive two-year drop in three decades, says the IEA. The industry cut more than US$300bn in spending in two years, or 42 per cent of the total, an unprecedented downturn, even taking into account a significant reduction in costs. North America accounted for around half the drop. “If prices remain at current levels, a significant rebound appears unlikely in 2017,” the IEA comments.
Lower oil and gasoline prices are also hurting energy efficiency trends in some countries, particularly in the transportation sector where they have given a boost to the sale of sport utility vehicles, says the IEA. Consumers have moved away from energy-efficient vehicles that they favoured when oil prices were higher. In the USA, SUV sales are now 2.5 times higher than light duty vehicles sales, while in China, SUV sales are four times higher than light duty vehicle sales.