The Saudis aren't the force they once were in oil

Saudi Arabia ruling out an oil production cut shows they don’t carry the big sword they once did. As a result, OPEC is now oil’s version of music’s Milli Vanilli - by that I mean we just don’t know the truth about what they are say they are producing. To be frank, the Saudi oil minister, Al-Naimi, coming stateside to face US shale producers is an odd move - especially when he didn't do this when the price of oil was falling violently. 

We will likely see a pullback in US shale production next year now that dividend cuts are rampant, but I believe the Saudis thought the falloff would come much faster. The Saudis likely expected to see more blood in the water here in the US. At this point but they must be surprised shale producers are still hanging in there if you look at total production figures (roughly 9.4 mln to 8.7mln in 2016. That could change as strong hedging programs come to a end for shale players. Saudi Arabia, Qatar, Russia and Venezuela to freeze oil output at January levels - near record highs is another example of how drugs wore off and the pain is beginning to hurt again. In fact, Standard & Poor's downgraded Saudi Arabia's credit rating.

To learn more about our thoughts on the decision by the Saudis to freeze oil production, check out our CNBC World interview here. 

Photo Courtesy: Reuters/Heinz-Peter Bader