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“I have doubts that all of Saudi’s production is really that low. They have started enhanced oil recovery on Ghawar years ago. They spent $17 Billion on Manifa for 900,000 BPD of heavy, sour (cheap) oil.”

They really are that low:

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/01/12/how-low-can-oil-prices-go-welcome-to-the-oil-markets-old-normal/

Saudi Arabia has some of the world’s lowest production costs, rivaled only by Iraq and some parts of Russia. Production costs in Saudi Arabia are about $4 to $5 a barrel, Naimi said recently.

The Saudi oil minister al-Naimi’s interview in Argus Global Markets should send chills down the spines of oil producers. He noted that “sooner or later, however much they hold out” high cost oil projects such as wells in Brazil’s sub-salt offshore region, off the coast of west African, and in the forbidding Arctic would have to scale back in response to low prices. “Will this be in six months, in one year, two years, three years? God knows,” said Naimi. “I say Gulf countries, and particularly the kingdom, have the ability to hold out.”