Last Thursday, Russian Energy Minister Alexander Novak claimed that Saudi Arabia had proposed a 5% cut in oil production.

That set the oil price roller coaster off and running, with crude prices shooting up to levels not seen in a month.

As of close of oil trade Thursday (2:30 p.m. ET), West Texas Intermediate (WTI) – the New York benchmark oil rate – was up 7.7% since that Monday, with the first three-day price rise of the year.

There is only one problem.

My contacts in OPEC and Saudi Arabia tell me that things look very different behind the scenes.

Here’s what’s really going on…

Saudi Arabia Can Weather Low Oil Prices… for a While

Despite the Russian Energy Minister’s claims, my contacts in Saudi Arabia and OPEC categorically state that no offer to cut production was made.

At least not formally.

Welcome to what is becoming the latest geopolitical game of smoke and mirrors.

It’s déjà vu all over again.

These last two days remind me of the meetings I had recently in Abu Dhabi. Once again, an apparent move to engineer a reduction in oil production was scuttled by the recalcitrance of one of the main players.

As I have written on several recent occasions, the attempt to forge a workable cut in production is a very dicey one. The Saudis continue to maintain a posture of defending market share by driving other producers to cut production first.

In theory, Riyadh can do this because it has the cheapest production costs – rumored to be less than $12 a barrel on average. This has always been difficult to substantiate given that basic data has been unavailable since the Saudis took over Aramco in 1979.

The trial balloon floated recently – the idea that the Saudi government may be interested in privatizing a portion of what is now Saudi Aramco – is intriguing in this respect. It would at last allow outside folks to have access to some real reserve, cost, and profit figures.

Still, it’s clear that the Saudis can weather a low price of oil better than anybody else.

Even so, they have been forced to reenter the global financial markets for the first time in years, while significantly revising the budget by cutting expenses and introducing new taxes.