The resist movement hit OPEC. Oil prices hit a four year high as OPEC resists President Donald Trump’s call for more oil. The oil market is starting to understand what the Energy Report has been warning about for years. Underinvestment in the energy space has put us behind the demand curve and global production is going to struggle to keep up. While the market is focused today on the fact that OPEC failed to raise oil production at this weekend’s meeting in Algeria, and Iran blaming the U.S. for last week’s attack on a military parade, the real reason they refused to increase could be that they don’t have enough spare capacity to bring on line quickly.

In fact, last month OPEC rose by only 41,000 barrels per day (bpd) to 32.3 million bpd in July while Saudi Arabia’s production fell by  150,000 bpd, surprising many who thought that Saudi Arabia was ready to ramp up and flood the market. Yet, now many are wondering if the Saudis have any significant spare production capacity to speak of. Dow Jones reported that the Saudis are running low on Arab Light Crude for October allocations. The “Highly-prized Arab Light is getting more demand than expected. In fact, this signals that the Saudis can’t pump much more than 11 million barrels per day. Still, the Saudis put up a brave face. Saudi Energy Minister Khalid Al-Falih said that “Our plan is to meet demand. The reason Saudi Arabia didn’t increase more is because all of our customers are receiving all of the barrels they want.”  While he says that they plan to increase output in September and October, they are not committing to any specific amount. OPEC’s inaction this weekend is forcing the reality side equations to set in. Instead of the mantra “lower for longer,” now we must get used to the fact that oil is in a new Super Cycle.

The AP reports that Iran’s president on Sunday accused an unnamed U.S.-allied country in the Persian Gulf of being behind a terror attack on a military parade that killed 25 people and wounded 60, further raising regional tensions. Hassan Rouhani’s comments came as Iran’s Foreign Ministry also summoned Western diplomats over them allegedly providing havens for the Arab separatists who claimed Saturday’s attacks in the southwestern city of Ahvaz.