5/7/2015
By Charles Payne, CEO & Principal Analyst

Don't look now, but crude oil continues to surge and there's a chance that war with bullets will derail the war of nerves launched by Saudi Arabia last year against America's fracking industry. The Oil Kingdom's gamble to not adjust production even as demand waned saw crude prices collapse. Consequently, the US rig count also collapsed and capital expenditures were curtailed significantly.

In the most recent tally, another 27 oil and gas rigs were taken out of production, bringing the total to 905 from 1,931 in September of last year. The lowered rig count is finally impacting US crude production, consequentially helping prices rebound.

Yet, lowered production alone doesn't explain the 50% rebound in crude prices. But, what does make sense is the war in Saudi Arabia's backdoor. The situation in Yemen hasn't improved as Houthi rebels continue to spread and even launched rocket fire into Saudi Arabia this week killing three people. The writing is on the wall; it's going to take more than air strikes.

Of course, considering Saudi Arabia's military expenditure, they probably knew this moment would happen. Only three other nations spend more on military, but considering the size of the population and gross domestic product (GDP), Saudis look like they've prepared for Armageddon.

Charles Payne
Wall Street Strategies

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