Oil prices have remained rangebound in recent weeks, with macro concerns driving the direction of both Brent and WTI. Oil trading in the past weeks has seen remarkably little volatility, with Brent futures moving within a narrow bandwidth between $81 and $84 per barrel lately. Macro factors seem to be dominating the minor day-on-day moves in crude, with two Federal Reserve governors warning against interest rate cuts in the next two months. Consequently, oil prices are set to end the week at a slight decline, with Brent closing the week around $82 per barrel. Last week, the International Energy Agency reported that global oil demand growth is losing momentum, with demand growth clocking in at 1.4 mb/d in January, down from 2.8 mb/d in 3Q23 to 1.8 mb/d in 4Q23. According to the IEA, the expansive post-pandemic demand growth phase has largely run its course. Last year, Saudi Arabia’s sovereign wealth fund became the world’s top spender, accounting for a quarter of the $124 billion that sovereign wealth funds invested in total. Saudi Arabia has been spending heavily both abroad and at home—the home of the world’s megaprojects, such as the $500-billion futuristic Neom project and a whole new airline, among others. As a result, last year, the Public Investment Fund’s cash and treasury assets slimmed from over $105 billion in 2022 to some $37 billion as of September, according to official Saudi data cited by the Wall Street Journal this week. It’s getting harder to keep up with all the megaprojects—and oil prices remain stuck at around $80 per barrel. Saudi Arabia has tried its best to prop oil prices up and keep funding its ambitious Vision 2030 program—Crown Prince Mohammed’s plan for turning Saudi Arabia into a diversified economy. There is nowhere else this money can come from except oil. The kingdom is stretching itself thinner and thinner. The decline in sovereign wealth fund money was part of the reason why Saudi Arabia announced earlier this month it would cancel a planned oil production capacity expansion. Energy minister Abdulaziz bin Salman cited plans to redirect investments to other areas of Aramco’s business as one reason for the decision and intentions to invest more in the energy transition as another. Bin Salman also noted that thanks to the current production curbs, there is a pretty soft cushion of around 3 million barrels in spare capacity in case supply suddenly tightens elsewhere. But whether the Saudis would really use the capacity cushion in case of a supply disruption is quite another question. When you’re up to your neck in projects whose total price tag is well over a trillion dollars, letting a good supply disruption go to waste would be inadvisable. But if thir is peace in the valley their is another solution, Debt!! It is certainly one way to keep funding the kingdom’s transformation projects. With the prospect of rate cuts on the horizon, debt markets would certainly begin looking a lot more tempting than they did over the past two years. More borrowing may be on the way. Oil prices may be doomed. Major acquisitions in the shale fields last year are now likely to have their own impact on production trends as more production in the shale patch becomes concentrated in fewer hands. Prices are doomed as the cost of shake production plunge thanks to the economics of scale and technologies that increases yield proliferate.