Speaker 1: Well, as we have been discussing today's Saudi Arabian energy Minister,
Speaker 1: Prince Abdelazi's Ben Solomon said, extreme volatility and a lack
Speaker 1: of liquidity means the futures market is increasingly disconnected from
Speaker 1: fundamentals and as a result, Pick plus may be forced
Speaker 1: to cut production. Joining us now to discuss we have
Speaker 1: Alan Walge. She is president of Transversal Consulting. So Ellen,
Speaker 1: is this a fair call from the Saudi minister energy
Speaker 1: minister cutting production would help to stabilize growing dysfunction and
Speaker 1: energy markets or does this look like a thinly veiled
Speaker 1: justification for getting the oil price back up again. M
Speaker 1: that's a really good question. I think that his statements
Speaker 1: are very chacteristic of of what we've seen from Prince
Speaker 1: Ability so far. There they're actually somewhat cryptic, I think,
Speaker 1: and um, it's not really clear that he actually does
Speaker 1: think that the market is oversupplied and that we need
Speaker 1: to see a cut, but it did seem like he
Speaker 1: was almost threatening it as kind of a hypothetical. So
Speaker 1: I don't think we should read too much into the
Speaker 1: ideas that that he thinks that we need to kind
Speaker 1: of have some sort of reset by a major production
Speaker 1: cut UM. But I do think his his point overall
Speaker 1: that the markets are extremely volatile, that oil prices are
Speaker 1: are incredibly volatile, and that they are reacting to things
Speaker 1: that are not necessarily showing up in the physical market
Speaker 1: UM is a very good point. UM. I don't think
Speaker 1: that UM, you know, OPEC cutting their their production quotas
Speaker 1: is necessarily going to help fix this unless there's one
Speaker 1: one way that that might actually help, because UM open
Speaker 1: plus isn't most members are not producing at their quotas,
Speaker 1: and the quotas are in fact totally unrealistic production targets
Speaker 1: for them, And if they did cut back on a
Speaker 1: lot of these quotas, it might help the market to
Speaker 1: realize that UM, just because the quotas are high, doesn't
Speaker 1: mean that's where production is actually UH is actually heading
Speaker 1: or can actually get. So it might actually bring a
Speaker 1: bit of clarity to the market. So, so Ellen, you
Speaker 1: know you're you're an analyst. When when he talks about
Speaker 1: the difference between the paper and physical markets, which one
Speaker 1: do you think most accurately represents the fundamentals? I think
Speaker 1: that right now we're really seeing that the the paper market,
Speaker 1: or it's not really a paper market anymore, but is
Speaker 1: very much UM reacts to news, kind of overreacts in
Speaker 1: a way, so we see a lot of the moves
Speaker 1: kind of UM amplified in a way that we don't
Speaker 1: necessarily it doesn't necessarily reflect the physical market UM. So
Speaker 1: you know, we see a report that you know, something
Speaker 1: might happen to with UM with the nuclear negotiations with Iran,
Speaker 1: and suddenly oil prices drop more than they should given
Speaker 1: the fact that we're not actually seeing a nuclear deal. Yeah. Well,
Speaker 1: oil process, to be fair, have been on a pretty
Speaker 1: wild ride, ranging between the mid sixties too above a
Speaker 1: hundred and twenty barrel over the past year, but the
Speaker 1: average over the past five years is about sixty barrel.
Speaker 1: Can you imagine a scenario where we get back to
Speaker 1: those labels in a sustainable way? I could see a
Speaker 1: time when we do get back. I think that it
Speaker 1: would require a total end to the hostilities between Russia
Speaker 1: and Ukraine and all of the Europe and the United
Speaker 1: States in Asia, to just completely end any kind of
Speaker 1: sanctions or retribution, and I don't see that happening any
Speaker 1: time soon. I think there's a lot of UM push
Speaker 1: from policymakers to continue this, uh, these actions, So I
Speaker 1: don't see that in the near future either that or
Speaker 1: we if we saw a big re found in production,
Speaker 1: to say from the United States or from another area,
Speaker 1: which I also don't see is particularly likely in the
Speaker 1: next couple of years. In our story, we say that
Speaker 1: open interest and trading volumes are well below average levels,
Speaker 1: and that a lot of this is because of the
Speaker 1: price wings the volatility, uh, some of it coming from
Speaker 1: the Ukraine war. Uh. Do you see it that way?
Speaker 1: And does that take you further away from fundamentals or
Speaker 1: does it actually shrink the market more to real buying
Speaker 1: and selling. Actually, I do think in this case it
Speaker 1: takes us away from the fundamentals because people, many, many
Speaker 1: people are operating under the impression that more oil had
Speaker 1: come off the market due to the rush of Ukraine
Speaker 1: issues then actually had and so we were seeing them
Speaker 1: react to what they thought was going on or what
Speaker 1: they thought was happening, as opposed to the actual barrels
Speaker 1: that we were seeing move on the market. We are
Speaker 1: on procession watch at the moment. If we're not already
Speaker 1: in one, should we have a global recession where two
Speaker 1: then for oil prices exactly and That's a really good question,
Speaker 1: because I think a lot of it does depend on
Speaker 1: the European energy situation and whether we see a lot
Speaker 1: of switching of UM, you know, of oil for natural
Speaker 1: gas U. Typically oil prices should go down in a recession.
Speaker 1: But if the European energy market continues to not be
Speaker 1: able to buy natural gas or for natural gas, and
Speaker 1: instead they are continuing they buy oil UM, that could
Speaker 1: keep oil prices more elevated than we would normally expect.
Speaker 1: Or they could or they could turn more to nuclear,
Speaker 1: which we heard from from Germany, and that might be
Speaker 1: have the opposite impact. It would the nuclear would take
Speaker 1: a longer time. I think absolutely up. Thank you, Ellen,
Speaker 1: We're out of time. Ellen Wall, President of Transversal Consulting
Speaker 1: with US