Reality setting in, but it's never been a secret, the Saudis have the oil ace in their hand. I just heard that Saudi Arabia could withstand 7-10 years of $30, $40 oil. It was nice while it lasted and I think Shale Oil is a resource that we'll come back to again and again in the future, but...  

It's time for this nation to prepare to lead the world in shale gas production and exports.

For the last three years, the incipient imbalance between supply and demand was masked by a series of one-off supply interruptions which removed enough crude from the market to offset rising shale output.

U.S. sanctions on Iran coupled with civil wars and unrest in Libya, South Sudan, Syria and Iraq all helped conceal the extent to which the market was fundamentally oversupplied.

As the Energy Information Administration has repeatedly pointed out, production losses as a result of these interruptions has broadly matched the rise in U.S. shale output ("U.S. liquid fuels production growth more than offsets unplanned supply disruptions" Aug 27, 2014).

The timing of the correction (benchmark Brent prices are down more than 25 percent since June) was always uncertain.

I thought it would come a little later, starting in 2015, when the pressure from rising rival supplies and stagnating demand would really squeeze market share for Saudi Arabia and the rest of OPEC.

But the fact that the decline was triggered by resurgent oil exports from Libya, which rose from 200,000 barrels per day in June to 900,000 at the end of September, according to the EIA, should come as no surprise.

Since it was only supply interruptions that had supported the market above $100 for the last two to three years, any resumption was bound to trigger a sharp correction, as the EIA has noted ("Lower demand, higher supply drive oil prices to lowest level since 2012" Oct 8, 2014).

http://www.reuters.com/article/2014/10/16/opec-oilprices-kemp-idUSL...