The Saudi Mirage — Why Oil Is Going Higher, Sooner Than You Think
Despite the panic over the weekend over “more OPEC supply”, oil has been having a good week price wise. But, in my view, the bigger move is still coming. It’s just not going to come how you expect. Or when.
What’s playing out in oil markets right now is a supply mirage, stage-managed by Prince Abdulaziz and blessed by Trump’s political timing. And frankly, it’s enabled by the absence of anyone in the administration sitting Trump down and saying, “Sir, U.S. shale is spent.” Inventories are exhausted. Frac crews are maxed. “Drill, baby, drill” isn’t a domestic production strategy anymore—it’s a geopolitical talking point. I’ve long argued it’s about preserving oil and gas in the global mix, not pretending the Permian can bail us out again. If Mr. Wright can’t convince Mr. Trump of that, Saudi will exploit it for everything it’s worth.
So, the under-educated world (regarding oil and gas production) sees “Saudi barrels returning.” The headlines scream “voluntary cuts unwinding.” The IEA and EIA both breathe a sigh of relief. But the real story? I’m starting to wonder if this is a setup. A deliberate, patient, strategic trap.
The Short Game: Talk Down Oil, Buy Time
Let’s start with the unwind of voluntary cuts that Saudi just said will return to the market over the next three months. It’s a reversal of voluntary cuts—not quota changes—and it’s being framed as a stabilizing gesture. But here’s the thing: Prince Abdulaziz doesn’t do random.
He knew the market could absorb the barrels. He knew prices wouldn’t crash. And he knew the return would:
Expose weaker OPEC+ members who can’t produce to quota.
Force the market to revise its illusion of OPEC spare capacity.
And most importantly, buy time for Saudi’s long game.
This is their entire economy. It pays to know how it works.
The Long Game: Declines, Declines, Declines
OPEC’s own internal modeling acknowledges a 5.5% annual base decline rate as disclosed this week. It’s the first time I’ve seen that number. So let’s calculate what that means. That’s at least 1.5 million barrels per day of natural decline, every year—not including Russia or the U.S.
Let’s zoom in on that.
Russia’s production is barely stable under sanctions, with limited access to western tech and the war not looking to end anytime soon.
Iran has been exporting ghost barrels under shadow diplomacy, but despite the current ceasefire, one war or angry Trump tweet could vaporize that supply and send us back where we were two weeks ago: on the verge of a big Middle Eastern war.
And the U.S.? The shale boom is dead. Production growth is over. So, long live the shale decline. Here’s the part nobody’s pricing in: U.S. base decline rates are 30–40%. New wells die fast. Legacy fields are exhausted. Private operators are tapped and sold out and Public companies are financially disciplined (read: scared). DUCs? Gone. Growth? Over.
The Trap: Saudi’s Real Win Isn’t Today’s Price
Let’s be blunt. Prince Abdulaziz isn’t adding barrels because he wants to flood the market. He’s doing it because he knows most producers can’t follow him. He’s turning the lights on in the theater—and exposing that the actors have already left.
And by talking oil down now, what happens?
U.S. shale producers don’t invest and the decline becomes visible
Rigs stay cold and layoffs exacerbate the problems.
Wall Street stays skeptical and all in on Mag 7 stocks.
Trump doesn’t panic until it’s too late.
The IEA lowers its alarm bells.
All while Saudi re-engages with Trump, stabilizes its LNG rollout, and readies its gas-powered domestic switch. And when demand jumps in 2026–27 and the cracks show—he holds all the cards.
The Revelation: There Is No Cushion
What’s coming isn’t a demand shock—it’s a confidence crisis in global spare capacity. When the market realizes: Saudi has already added back what it can; U.S. shale can’t grow; The SPR isn’t coming back; and, 1.5–2 million bbl/d are quietly disappearing each year…the illusion of market flexibility breaks.
That’s when prices go vertical, and there’s nothing anyone can do.
The Takeaway
Prince Abdulaziz is setting the board. He’s not chasing price—he’s shaping the post-shale oil order. Trump is placated. Investors are lulled. And the world keeps pretending there’s more oil than there is.
But don’t be fooled. This is the mirage before the storm.
Nice take on the situation today and I didn't know OPEC disclosed a 5.5% annual base decline. Based on the current producing fields worldwide one could certainly see production declines happening broadly. However, one should also consider new exploration and new technology to recover oil that would otherwise not be produced. There are many areas worldwide that have not yet been explored or developed - Africa, for example; and the Middle East shale oil formations; and Venezuela, which has the largest oil deposits in the world.
And there are technologies that are just now starting to be deployed in shale oil wells that can boost production and reserves and extend well lives by 10-30+ years. Midland was nearly a ghost town in 1995, and before that in 1987, and before that in the early 1970's. It will boom again. The Texas Bureau of Economic Geology estimated 2.5 Trillion barrels of oil in Permian basin shale formations, and recovery to date has only been about 35 Billion barrels, including the conventional formations. The Eagle Ford and Williston each have about 300 Billion bbls of oil in place, but recovery to date in all zones is just 4.2 and 8.2 billion barrels. Oil prices will surely increase, and that increase will enable more development and application of new technologies to recover more oil. EOR has been dismissed as not contributing much to global oil production, only about 1.5%, but that's because something else has always come along - like horizontal drilling and multi-stage fracs. So while I certainly agree with you that in near term the supply-demand balance will tighten and oil prices will rise, moving out 5-10 years and beyond I think new technologies will enable recovery of a lot more oil than the less than 6% we are getting out of shale formations on primary recovery. Thanks for this post!
A good review. I believe the 5.5% annual base decline from existing fields may not include increases in new investment (additional drilling, workovers, EOR...). Your article made me think about other impacts on crude pricing; what is the "war" premium built into the current oil price (12$/BBL?) and how does that change? Trump needs lower oil pricing to keep inflation low and what other deals are being cut? When oil prices increase, how fast will alternative energy substitutes replace crude and its derivatives? Prior crude price spikes resulted in a crude glut. You may be right and it may take us a while to see this upward trend take hold. Keep up the great posts!