You Can Tell By The Commentary What Kind Of Market We Are In

The oil market narrative continues to baffle me. In the latest episode of "Price Driving Narrative," Saudi Aramco announced that it is no longer pursuing expanding its spare capacity to 13 million b/d. Soon following this announcement, the oil world is in upheaval. Most of the commentary we've seen so far borders on the "peak oil demand" narrative, while very few are pointing to "Saudi's inability to increase production."

Whatever the case, it appears the consensus is leaning towards the peak oil demand narrative, which is telling of where we are in this oil cycle.

But is it really? We think the best take from all of this comes from John Kemp.

Source: John Kemp

This isn't the first time the Saudis have reneged on their pursuit of higher spare capacity. At ~9 million b/d, the Saudi already has ample spare capacity left (~3 million b/d), so spending more capital in times when financing is tight seems to be counterintuitive.