(EnergyAsia, September 30 2015, Wednesday) — Amid the worst oil glut in over a decade, a Norwegian research firm wants the world to start worrying about possible oil price shocks.

In its latest analysis of the global oil markets, Rystad Energy said the world’s spare production capacity, most of it sitting in Saudi Arabia, remains low even after recovering the last few years. Beset by worsening domestic and regional political turmoil, the kingdom is engaged in a bruising fight for global market share with other oil producers, namely Russia and the US that has sent crude prices plunging by over 60% since mid-2014.

Rystad Energy senior analyst Nadia Martin estimates Saudi Arabia’s spare capacity at just 1.1 million b/d, almost half its 2009 level of 2.1 million b/d.

“The oil market is at risk of price spikes despite the focus on oversupply. Current spare capacity is far lower than the 2.1 million b/d the kingdom held in 2009, when the oil market last demonstrated a significant imbalance in supply and demand,” said Ms Martin.

She expects the oil market to rebalance next year, but there will be limited capacity to respond in the event of a sudden disruption that will the world vulnerable to price shocks.

She expects Saudi Arabia and Russia to each produce 9.9 million b/d of crude this year to remain tied as the world’s largest oil suppliers. They last shared the top spot in 2008 when each produced 9.3 million b/d. The US will keep third position.

In 2009, Saudi Arabia sharply boosted production to tame the markets when Brent crude had surged to a record high of more than US$145 per barrel in July 2008.

Since the start of the decade, Saudi Arabia has helped keep the market in a buoyant state by refusing to unleash supply from its spare capacity.

In 2012, Saudi Arabia boosted crude exports to ease market tightness as the US and the EU imposed additional trade sanctions against Iran and Libyan production collapsed during the Arab Spring.

As a result, the Saudi spare capacity fell to a low of just 100,000 b/d in 2012, before slowly rebuilding it to 400,000 b/d in 2013 and 800,000 b/d last year, said Rystad Energy.

Russia is unable to boost production in the short term as it is already producing near capacity, despite the prospect of starting up two large offshore field this and next year. The Arkutun-Dagi in Sakhalin 1 is due to start up soon and will be followed shortly by the Vladimir Filanovsky, both rated among the world’s 10 largest offshore fields.

This leaves the US as the only major producer that can significantly increase output in the near-term, said Rystad Energy. It sees US crude production at 8.2 million b/d in 2015 and 8.35 million b/d next year.

In the event of a supply crisis, it expects the US response to occur in three steps. Within weeks, producers will connect already completed wells to increase output by 100,000 b/d. The following month, they will boost production by another 500,000 b/d by connecting drilled wells, called DUCs. By the end of the first year of the supply crisis, the producers will be ready to increase rig count to increase output by one million b/d.

Despite America’s rapid supply response, Rystad Energy said its efforts will not be sufficient to tame the global oil market’s volatility.

Oslo-based Rystad Energy describes itself as an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products.