The Kingdom of oil

The Kingdom of Saudi Arabia has returned to the top of the list of the worlds biggest oil producers according to a report by the International Energy Agency (IEA).

Saudi Arabia over took the US – which had been in pole position since April 2014 – by producing 12.58 million barrels per day (bpd) last month while the US’ output declined to 12.2 million bpd.

The shift in position was a result of both an increase in Saudi output and a decline in the production of American oil.

Since May, however, we estimate that the U.S. has shut in 460,000 bpd of high-cost production, while the low-cost oil fields of Saudi Arabia have cranked out an extra 400,000 bpd

Despite the on going slump in oil prices – a phenomenon which usually encourages suppliers to reduce output, in the hope of encouraging price inflation – the Kingdom has remained committed to increasing its production. This strategy is widely seen as an effort to maintain Saudi’s market share in the face of rising challenges from alternatives, such shale oil.

The average price of a barrel of oil has plummeted from $115 in June 2014 to below $30 in January this year.