Saudi Arabia tops US as world's biggest oil producer

By Ovunc Kutlu

NEW YORK

Saudi Arabia has surpassed the U.S. as the world's biggest oil producer, according to the International Energy Agency (IEA) Tuesday.

The Kingdom produced an average of 12.58 million barrels per day (bpd) last month, while the U.S. output regressed to an average of 12.2 million bpd.

"The U.S. had held the top rank since April 2014 when the rapid rise of light tight oil saw it vault past Saudi Arabia," the IEA noted in its monthly Oil Market Report.

"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," the report added.

The steady surge in Saudi output is the result of an adamant Riyadh oil policy against low oil prices. OPEC's most influential member refused to trim the cartel's total output since November 2014, five months after oil prices started plummeting from their June level of $115 a barrel.

Even when prices fell below $30 a barrel in January, the Kingdom kept increasing its oil production -- a strategy to preserve and raise its share in the global oil market, and to force high-cost oil producers, like the U.S., out of the market.

With low oil prices and a glut of supply in the market, high-cost producers in the U.S. saw less return of their investments, cuts in expenditure and oil wells were shut down.

The hardest effect was on the U.S.'s output of crude oil.

In April 2015, the country's crude production reached its highest level since 1971 with 9.6 million bpd. However, that figure fell to 8.7 million bpd in June this year, according to the U.S.'s Energy Information Administration.

The agency forecasts U.S. crude output to continue its decline by averaging 8.5 million bpd next year.