A shift in Saudi oil policy?

A letter in today's FT points out what the author calls a new 'aggressive' shift in Saudi oil policy in limiting new oil production capacity from becoming operational, and are shifting market perception towards the idea of Saudi oil supply being limited. Interestingly, the author points out that the Saudis are encouraging the idea of new supplies from the 'oil sands':

"Conceding to oilsands suggests an inability to produce enough to prevent investment in this competing source, and perhaps also a recognition that having this expensive alternative as the price-setting mechanism in the long-term oil market is a positive development for prices."

To the extent that 'oil sands' would raise the international price of oil in a world with growing demand - this seems to be a valid point.

The Saudi's 'aggressive shift', however, only looks 'aggressive' when compared with the author's benchmark of 13m b/d capacity. Against a benchmark capacity of 10-10.3 m b/d, as some analysts estimate, the Saudis would look more dovish.

Update: King Abdullah's increasingly publicised comment "I keep no secret from you that when there were some new finds, I told them, 'no, leave it in the ground, with grace from god, our children need it'" (quoted by Reuters) is stirring up quite a bit of reaction - here is a list of comments and reactions made by various analysts. Expect this "quiet bombshell" of a quote - supposedly indicating Saudi unwillingness to help ease oil prices and complicity in creating a recessionary environment in the west - to be the subject of political rhetoric in the US presidential race if (when?) the price of oil goes past the $125-130 mark. The hawks in Washington will find this easy to brandish about as 'evidence' if Saudi Arabia becomes an issue in the presidential campaign (which will probably be the case if incriminating evidence is found as part of ongoing probes into BAE's dodgy arms deals with the Saudis).

The comment, incidentally, was made by King Abdullah during a meeting with the interior minister, and has actually been misquoted. The link to the original story by the Saudi Press Agency (SPA) - which Reteurs cite as the source of the comment - is here. The acutal quote, from the original story, is as follows:

"I do not hide when new discoveries were found, I told them, let them remain in the ground for our children and grandchildren who need them."

There was no "with grace from God" in the original quote, it seems to have been penciled in by the Reuters journalist.