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US shale oil threatens to derail OPEC's future: IEA

An oil drilling rig in North Dakota
Getty Images
An oil drilling rig in North Dakota

The rise of North American oil supplies could test the future of OPEC which may have to curb supply to accommodate rising shale oil volumes, a new report has found.

The increase in U.S. output is a "defining feature of tomorrow's market" according to International Energy Agency's oil market report and could test the producer group's share of the global oil market.

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"The producer group, ineluctably faces the test of having to rein in supply and accommodate rising volumes of shale oil – unless falling prices curb shale oil production first," the report found.

Non‐OPEC supplies rose by 570,000 barrels per day in July to 54.9 million barrels a day, with North America providing around 40 percent of the growth, said the IEA, with Canada rather than the U.S. responsible for most of this increase.

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However, OPEC's imminent challenge is less future demand issues and more practical difficulties in bringing production to market, the IEA said, as domestic developments in member countries continue to cause production strife.

OPEC crude oil supplies edged lower in July, down 165,000 barrels a day to 30.41 million barrels due to continued supply disruptions in Libya and despite higher Saudi output.

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"There is spare capacity in OPEC to the tune of about 3 million barrels a day which is about 3 percent of global demand," said Jason Gammel, senior analyst at MacQuarie.

"The supply risks are multiple. We focus on MENA (Middle East and North Africa), Libya has had a lot of interruptions to their supply because of worker strikes. Nigeria is the other big wild card here, there has been a lot of theft going on there and political situation is also pretty risky," he said.

Libya's civil unrest forced the nation to cut exports to their lowest level since the civil war in 2011. In Iraq, pipeline attacks helped push output below 3 million barrels per day for the first time in 6 months, and planned infrastructure work in September may slash exports for months and security issues cloud supply prospects in Algeria and Nigeria.

Iraqi production also fell below the 3 million barrel per day mark for the first time in five months and volumes are now forecast to plummet by around 500,000 a day starting in September, following the announcement of planned infrastructure work at one of the country's major export terminals.

By CNBC's Jenny Cosgrave;.Follow her on Twitter @jenny_cosgrave.

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