Saudi Strategy Working: OPEC Captures Largest Market Share Since 1975

Submitted by Nick Cunningham via OilPrice.com,
OPEC has captured its largest share of the oil market since 1975, which could be seen as a vindication of the cartel’s strategy over the past two years. But it also creates vulnerabilities for the U. S. and others, who are once again increasingly dependent on the Middle East for oil.
OPEC and its de facto leader Saudi Arabia have pursued market share over the past two years, and with great success. Rather than curtailing production in order to prop up prices, OPEC members ran horrific budget deficits and kept output elevated. That crushed crude oil prices, and has forced many high-cost drillers out of the market – and continues to do so. Even though the overall benefit to OPEC is questionable given the huge revenue losses, OPEC has emerged with its largest market share in forty years.
That might be viewed as a win in Riyadh, but it creates problems elsewhere – the world is at risk of being overly dependent on the Middle East for oil, warns the executive director of the International Energy Agency, Fatih Birol, in an interview with The Financial Times. Oil producers in the Middle East now have 34 percent of the global market share at 31 million barrels per day, the highest share since it had 36 percent back in 1975. By comparison, during the oil price bust in the 1980s, a time when new supplies came online in the North Sea, the Middle East’s share fell to 19 percent.

This post was published at Zero Hedge on Jul 8, 2016.