MercoPress. South Atlantic News Agency

OPEC calls to tackle “free for all energy speculation”

The Organization of Petroleum Exporting Countries conference in Vienna opened on Tuesday with a strong call to address the “free for all speculation in the energy sector” and the vindication that “throughout this turbulent period, supply and demand fundamentals have been sound”.

"The market has remained well-supplied with crude and stocks have been at comfortable levels, thanks to the pro active measures taken by our member countries", said Chakib Khelil, Minister of Energy and Mines of Algeria and President of the OPEC Conference in his opening speech. Chakib Khelil said that while prices were rising, "we were saying that this was due to the impact of non-fundamental factors, notably the heightened levels of speculation, the falling value of the US dollar, geopolitical developments, downstream bottlenecks and perceived market tightness". With significant changes to some of these factors "such as the recent strengthening of the dollar, the easing of geopolitical tensions and the sharpened expectations of a global economic slowdown, with its impact on oil demand, we have been witnessing big falls in the oil price". Speculators, he underlined, "have significantly liquidated their net long positions on the New York Mercantile Exchange, and this, in itself, has helped drive prices down". All of this vindicates "what we have been saying over the past year about the enormous impact that non-fundamental factors have been having on oil price volatility. This explains why we were reluctant to respond to calls to increase our production when prices were rising persistently, because we knew we would be treating the illness with the wrong medicine". The OPEC conference president underlined that the "issue of free-for-all speculation in the energy sector must be addressed comprehensively. There is too much at stake across the world for such high levels of volatility to be allowed to continue in this chaotic, damaging manner". However Chakib Khelil warned that volatility remains and has not become less of a problem, because of the recent reversal in the pressure on prices, from upward to downward. "Volatility is one issue. Price levels are another. They are connected, of course, but each also must be addressed in its own way". What the OPEC meeting must determine is the extent to which the underlying trends have changed in the oil market "whether we take this back two months, to when prices peaked, one year, to when the volatility intensified, or four years, to when there was a fundamental shift in the market's behavior to reflect the unfolding realities of that time".