I think the sentiment is basically correct here, but would like to make a comment on both of these points.

1)I'm not sure I could distinguish your two strategies. It's easily argued that we're seeing both, so I'm not sure of the value of this exercise.

Regardless of the Saudi position, they have an interest in adopting a position they may be confused with the other. In other words, if they really do have a great deal of oil production capacity available, then they have every interest maintaining ambiguity about that, to encourage speculators to keep the price high. If they are really running short, they have every interest in maintaining ambiguity about that to keep the global economic system as stable as possible.

The implication is that whatever their position, the management strategy I would adopt would be to try to increase the ambiguity about my true position.

I therefore agree with you that the exercise as outlined is of questionable value from one perspective. However, a slightly different perspective which may be of value is to consider things that you certainly wouldn't do if you were in either of these situations. This is somewhat analogous to falsifying possible hypotheses.

If I had spare capacity and plentiful reserves, I wouldn't let prices stay at explosive levels whilst the world drifts into recession. As the gloabal economy drifts toward recession I'd try to lock into long term contracts, before flooding the world with oil.

2) Something changed around 2000-2003 that caused the Saudi's to dramatically change "strategies" (quoted because the change may not have been voluntary). Prior to that, they were happy to keep oil in a permanent price range of <$30/barrel. After, they seem to want an ever rising price.

It seems reasonable to imagine that around this time, the combined rest of world spare capacity hit, for all intents and purposes, zero. It doesn't seem to have any necessary implication for the specific saudi situation.