The OPEC member states and their partners exerted extraordinary efforts last year to stabilize the oil market in the interests of producers, consumers, the oil industry and the wider global economy, said the organization’s chief on Thursday.
“This is on the physical side of the oil market. On the financial side, we have been observing an accelerated trend in speculative trading, with investors and other players trading futures and options at faster rates, sometimes severely impacting market liquidity and hindering price discovery mechanisms,” OPEC Secretary General Haitham Al-Ghais said in the opening remarks of a workshop on the Interactions between Physical and Financial Energy Markets.
He pointed out that “what this past year has shown us is the need for the continued monitoring of factors driving volatility in energy-related financial markets, and how it can impact not only the short term, but the medium and long term too”.
The workshop was organized in collaboration between OPEC, the International Energy Agency (IEA), the International Energy Forum (IEF).
For his part, the IEF Secretary General, McMonigle indicated that both financial and physical markets continue to tighten.
“Rising inflation and underinvestment in physical supplies expose new vulnerabilities. Producers and consumers must have this in mind when engaging risk in investment or to understand the evolution of energy costs for consumers.” Meanwhile, Toril Bosoni of the IEA confirmed that volatility remains a risk for energy markets.
“The last three years have underlined the impact of supply and demand shocks as well as of financial markets for energy price movements,” she clarified.
“The broader consequences concern particularly inflation as well as investment to meet supply and respond to the energy transition.” Discussions during the workshop were structured into three sessions, grouped around the theme “Spot and paper markets: divergent trends amid low liquidity in futures markets.” The first session was on the ‘Factors driving volatility in the energy-related financial markets’.
This was followed by a second session which considered the ‘Impact of physical and paper oil interactions on market functioning and price discovery’. The third and final session covered ‘Ensuring adequate financing to sustain oil and gas developments
Source: Kuwait News Agency