Oil prices hit a two year high as U.S. oil rig counts had the biggest drop of the year and the Saudi Crown Price goes after his “rivals” in a corruption crackdown. Drama in the Saudi Kingdom as Crown Prince Mohammed bin Salman consulates power in a shocking crackdown that even saw Saudi billionaire investor Prince Alwaleed bin Talal arrested along with 14 of Mohammed bin Salman cousins. Crown Prince Mohammed bin Salman has also ordered that all members of the royal family should remain in the country and that may mean there are more arrest’s coming. Then there was a helicopter crash near Yemen killing a bin Salman rival, Prince Mansour bin Moqren, the deputy governor of Asir province and son of a former crown prince. One wonder if this is a coincidence or not.

This comes as global oil and petroleum supplies are draining at a historic pace as demand and OPEC production cuts are failing to keep up with global oil demand growth. Don’t look for shale oil producers to save the day they are in major retreat.  We saw the U.S. rig count fall eight oil rigs the biggest drop this year and the biggest drop since May 2016. That puts the U.S. oil rig count at 729 in the lowest level since May. Some of the drop is seasonal in nature but you can’t ignore the fact that the U.S. shale producers are seeing a peak in oil production as August U.S. oil output fell to 9.2 million barrels. That is well below what was expected at this point.

But it is not just shale that is peaking. Major oil firms have major CapX cutbacks and we will see a major disappointment in future production. Still, Reuters reports that exploration and production (E&P) companies expect to increase the amount of money they plan to spend on U.S. drilling and completions in 2017 by about 53 percent over 2016, according to U.S. financial services firm Cowen & Co. That was up from 50 percent in the firms prior capital expenditure tracking report last week.  That expected 2017 spending increase followed an estimated 48 percent decline in 2016 and a 34 percent decline in 2015.