OPEC and IEA Agree Not to Disagree: A Good Omen for the Industry

The IEA and OPEC are different organizations. Their briefs are different. They represent two worlds, two distinct interest groups and two schools of thought. They diverge rather than concur on major issues, but professionals run them; they may agree to differ yet both have no constraints in concurring, either. Despite all the odds, this industry, so very crucial to civilization, is maturing.

OPEC has been emphasizing for a long time now, that fundamentals — demand and supply — no more control the oil markets. Non-fundamentals — speculation to be specific — are now in full control and the world needs to rein them in.

At a point in time last year, while the bulls were in total control of the market, Minister of Petroleum and Mineral Resources Ali Al-Naimi underlined that the bond and equity markets in the US alone were valued at roughly $50 trillion. And then if money managers decided to reallocate a nominal one-half-of-one percent of those assets into crude, then that could translate into $250 billion influx of funds into the trade. And this equaled the value of the entire NYMEX WTI markets, having all the potential to destabilize the markets. That happened in July 2008 too and could happen again. Markets needed transparency, OPEC has been insisting on this for a long time.

The point now seems to be getting through. More and more, new adherents to the theory are emerging.

For a change now, the OPEC viewpoint seems to be gaining ground, getting the due attention it deserves. This was not based on rhetoric or partisan energy politics, it was based on facts, simple and pure facts, one could say now without the fear of being ridiculed.

Rigzone