NEW YORK (TheStreet) -- A fascinating statement from the CEO of Saudi Aramco, the state-owned oil company emerged on Monday, canceling a planned $100 billion expansion program of oil production in the kingdom.
The import of this statement from the Saudis couldn't be clearer -- they believe that supply is ample for at least the next several years and are saying that North American production increases are taking up the slack along with demand declines here in the U.S. to assure steady supply. Our newest technological breakthroughs of oil extraction, specifically from oil sands, shale and drilling offshore are working.
It's quite amazing, actually. For the last three years, the working theory on global oil supply was based upon the "swing" barrels available only through Saudi Arabia. With global demand of oil increasing anywhere from 800,000 to 1.4M barrels a day every year, and with our ability to create new supply apparently limited, we were at the mercy of the Saudis, who maintained the only ready supply of marginal barrels, estimated at anywhere from 2.5 million to 4.5 million barrels a day.
It was this surplus supply that was called upon during the breakout of hostilities in Libya to take up the slack -- it was also this supply that was standing between us and a global shortfall, suggested to begin right about now in the fourth quarter of 2011. With total supply outstripped by ever-growing demand, prices were expected to run well above the highs we've already seen, with predictions for $150, $200, even $250 a barrel.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV