I keep hearing talk from Middle Eastern leaders about a possible supply shortage if prices don’t promptly run back to higher ground. The market has responded and is higher for the third consecutive day. The argument from the Saudi’s is that lower capital spending levels during the oil bust mean the industry will have to replace 20 million barrels a day from declining oil fields over the next five years. They state that oil fields producing roughly 100 million barrels a day will decline at a rate of -6% a year for five years. Others argue the Saudi estimates are grossly overstated and that they are simply talking their position. Ed Morse, global head of commodities research at Citigroup, said his team believes the supply gap will be significantly less. He said they shouldn’t use 100 million barrels a day in the equation because roughly 20 million barrels a day are natural gas liquids or not refined for some other reason. Roughly 32 million barrels a day belong to OPEC countries, which can keep oil production going longer than their rivals, and another 5 million barrels a day come from Canadian oil sands or other fields that don’t fall off rapidly. He also believes growing oil production from the United States, Canada and Brazil could still ultimately outpace demand. I should also note, Baker Hughes recently showed the worldwide oil rig count up +106 from May to June and up +634 vs. June of last year. Here at home, the EIA has 2018 U.S. production forecast at 9.9 million barrels per day, even though it’s a hair lower than their previous estimate, it’s still the highest annual average production in U.S. history. The previous record was set in 1970 at 9.6 million barrels per day. Meaning a shortage of supply doesn’t appear to be looming anytime soon.