US Tops Saudi Arabia as World's Largest Oil Exporter
The demand for crude oil has risen recently, according to an organization that tracks supply and demand. The surge in U.S. production and the politics of OPEC finances allowed America to move ahead of Saudi Arabia to become the world’s largest oil exporter. The trend was temporary, but that may not be the case very soon.
The International Energy Agency issued its Oil Market Report, one of the most closely watched pieces of intelligence in the world. Global demand softened, primarily due to slowing economies around the world. The IEA maintained its 2019 forecast of 1.1 million barrels a day in consumption globally compared to 2018.
Politics were unsettled in Saudi Arabia, where a new energy minister, Prince Abdulaziz bin Salman, was put into the position earlier this month. Since then, any threat to Saudi export production has virtually disappeared. OPEC, where the finances of each nation are determined by oil revenue, has mostly kept to its production goals. However, the IEA pointed out that OPEC no longer rules the market: “A reminder to the producers that competition for market share is getting tougher comes from preliminary data showing that in June the US momentarily overtook Saudi Arabia and Russia as the world’s number one gross oil exporter.” U.S. shale production could make that permanent.
The dynamic of oil supply and demand in the second half will change modestly. Supply from non-OPEC nations is expected to soften, with the sole possible exception of the United States. OPEC members hope to maintain production flat for the balance of the year so as not to contribute to a drop in price. However, U.S. shale production remains relatively high, the primary reason America has become a net exporter of crude. Overall, oil supply will remain high and put downward pressure on price.
The IEA report indicates that demand will rise once again in 2020, but there are too many variables to say where additional supply may come from. The authors wrote, “The challenge of market management remains a daunting one well into 2020.”