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Editor: Helen Gavaghan.
ITEM ONE. Published, 11th February. Keywords: Energy, oil, OPEC, secretary general.
OPEC SECRETARY GENERAL'S SPEECH TO CHATHAM HOUSE, 27th JANUARY, 2014.
The following story is based on the slides of the reported speech - online at the OPEC Website. Link at the end of the report.
HE Abdalla S. El-Badri, secretary general of OPEC, on 27th January, 2014 delivered the keynote address in the Gulf scenarios section of the Chatham House conference, "Middle East and North Africa Energy 2014".
Mr Abdalla S. El-Badri took as his theme "How can longer-term oil-price fluctuations be managed?"
As one would expect from the secretary general of OPEC, Mr Abdalla S. El-Badri told the audience extreme prices are not in the interests of producers or consumers. He stressed that past experience has shown no one country or institution can set or control prices.
Short-term price fluctuations caused by geopolitics, supply disruptions, economic developments and weather are natural and unavoidable, and must be distinguished from extreme variations, he said.
A significant factor influencing oil price has been increased financialization of oil markets during recent decades, with oil increasingly treated as an individual asset class. Further, he said, speculative funds flowing in and out of the commodity futures markets have exposed the physical oil market to financial market volatility. The New York Mercantile Exchange (NYMEX) and Intercontinantal Exchange (ICE) have, since 2005, shown increased interest in oil, leading to a relationship between crude oil prices and speculative activity.
"This has meant that some price movements have not been driven by fundamentals, or the normal ebbs and flows of the market. They have been driven by market speculation."
As a stark example of market volatility he showed a slide reporting that in 2008 crude prices escalated from around $90/b in January, to a peak of over $145/b in the middle of the year, before sinking to a low of around $30/b in December.
"Extreme price fluctuations on this scale are clearly not conducive to the effective functioning of the market, particularly given the long-term nature of investments in our industry." (slide).
Stability is needed for investment.
"To put it simply: producers do not want to waste precious financial resources now on infrastructure that might not be needed in the future. At the same time, however, if timely and adequate investments are not made, then future consumer needs might not be met."
Mr Abdalla S. El-Badri presented a slide which seems to be saying that given a level playing field, that is one unaffected by speculative financial deals, it would be the cost of certain oil sands projects, deepwater and Arctic fields which would drive the upper value of marginal cost. Thus leading to the question: at what price levels would some of these projects become unworkable?
He stressed that OPEC Members are committed to invest, and to ensure that consumers receive oil when they need it.
12th February, 2014. The OPEC press office confirmed today (12/2/14) that this speech was given on the date stated, and said, "The Question and answers were under Chatham House rules." One typo and one omitted word inserted 12/2/14.
Joint Organisations Data Initiative (JODI) http://www.jodidata.org/
Accessed 11th February, 2014.
New York Mercantile Exchange. http://nymex.futuresource.com/local/nymex/login/index.jsp.
Accessed 11the February, 2014.
Intercontinental Exchange. https://www.theice.com/homepage.jhtml. Accessed 11th February, 2014.
Keynote speech to the "Middle East and North Africa Energy 2014" http://www.opec.org/opec_web/en/press_room/2725.htm Accessed 11the February, 2014.
Middle East and North Africa Energy 2014. New Uncertainties and New Opportunities. 27-28 January 2014.
Conference website. http://www.chathamhouse.org/Mena_energy14/agenda Accessed 11the February, 2014.
Item and reporting by Helen Gavaghan. Item closed to further correction within this item 12.05 GMT, 12/2/2014.Curatorial visit to this url on 14th February, 2014.
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