Russell: Time To Stop Over-Analyzing Oil Freeze, It's Not Helping

Russell: Time To Stop Over-Analyzing Oil Freeze, It's Not Helping
Perhaps it's time to halt the practice of both industry and media commentators to pontificate over what the leaders of oil producing countries meant when they speak, and focus on the actual words used.
COLUMN-Time To Stop Over-Analysing Oil Freeze, It's Not Helping: Russell
One of the enduring features of oil markets is a tendency to over-analyze and interpret every word uttered by the various players, with the current debate over a mooted output freeze being the latest case in point.

Reuters

(The opinions expressed here are those of the author, a columnist for Reuters.)

SINGAPORE, Sept 8 (Reuters) - One of the enduring features of oil markets is a tendency to over-analyse and interpret every word uttered by the various players, with the current debate over a mooted output freeze being the latest case in point.

But perhaps it's time to halt the practice of both industry and media commentators to pontificate over what the leaders of oil producing countries meant when they speak, and focus on the actual words used.

The latest shenanigans over whether the Organization of the Petroleum Exporting Countries (OPEC) and other major suppliers such as Russia will limit their output has generated heaps of noise, but very little of substance.

Effectively, it's the views, and actions, of four major producers that will determine whether there is any success in limiting production.

They are Saudi Arabia, Russia, Iran and Iraq.

So, in an attempt to cut through the noise, it's worth looking at exactly what the oil leaders of those countries have said recently, and take their words at face value instead of trying to work out what analysts and media think they were really trying to say.

Taking top exporter Saudi Arabia first, the most recent relevant comment came from Energy Minister Khalid al-Falih on Sept. 5 in remarks accompanying the announcement of a broad cooperation agreement with Russia.

"There is no need now to freeze production ... We have time to take this kind of decision," Falih said. "Freezing production is one of the preferred possibilities, but it does not have to happen specifically today."

That's pretty clear. No freeze for now, but maybe at some time in the future.

If you have to place an interpretation on those words, the most simple and logical one would be that nothing will be decided at the meeting of oil producers in Algeria later this month, but something may at the OPEC meeting in November.

Moving to Russia, and Energy Minister Alexander Novak said on Sept. 5 that an output freeze would have helped the market rebalance and his country would join one if an agreement can be reached.

That's also pretty clear, Russia would like a freeze, but everybody has to agree.

Novak also said that Iran should be allowed to reach the output level it enjoyed prior to Western sanctions against its nuclear programme, which were lifted earlier this year.


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