The Saudis are worried about oil demand. Or maybe they’re trying something new to prop up prices which steadfastly refuse to sustain a war premium.

The monarchy on Tuesday ordered Aramco not to proceed with a plan to boost capacity to 13 million barrels per day from the current 12 million.

The directive, revealed in a curt press release, marked a rather stark turnabout when juxtaposed with the rhetoric from CEO Amin Nasser in March of 2020, when the (now canceled) plan to boost the Kingdom’s maximum sustainable capacity was unveiled during a short-lived (and extraordinarily ill-timed) price war with Russia. Aramco, Nasser declared nearly four years ago, is “exerting maximum effort” to increase capacity “as soon as possible.”

That increase would’ve been the first in at least a decade and it would’ve been expensive. The Saudis are set to run deficits through 2026 as Mohammed bin Salman blows through money on everything from sports stars to futuristic construction projects.

There are pressing questions about OPEC+’s ability to force prices higher at a time when US production has surged and demand from China is in question. The Saudis need $100/barrel, give or take.

The ramifications of Riyadh’s decision to nix the planned capacity increase are potentially far-reaching.

Although the near-term impact is obviously negligible (the Saudis aren’t producing anywhere near their current capacity limit), market watchers will now need to assume less in the way of a supply cushion over the longer run.

So, if something were to disrupt supplies — a major war, for example — the Kingdom’s ability to quickly fill the void would be lower than if Aramco had implemented the capacity increase announced in 2020, as illustrated by the simple figure above.

A couple of quick caveats are in order. It’s possible Aramco just wants to plow whatever money gets “saved” from not pursuing the oil capacity expansion into other energy businesses and projects. And domestic efforts to reduce oil’s role in power generation will reportedly result in a de facto capacity increase within the decade by making more of Aramco’s production available for shipment abroad.

Still, it’s hard to escape the notion that the Saudis are i) less optimistic about the long-term demand picture than they were a few years ago, ii) spiteful about global efforts to move away from fossil fuels and hell-bent on making a point about what that entails for investment (less of it, with the potential to exacerbate future energy shocks) or both.

Take all of that for what it’s worth. On Tuesday, the answer was “not much” in terms of prices.