OPEC's Media Blockade: Power Play Ahead

When authoritarians want to hide information or suppress news, they do this. OPEC, the cartel, did something similar this week. They excluded journalists and news organizations from their June meetings. This behavior can be seen as either despotic or desperate.

OPEC+ is a group of 23 countries led by Saudi Arabia and Russia. They control 40% of the world's oil. Everyone cares about their meetings because they decide how much oil to pump each month. The discussions go from low-ranking officials to big decisions made by energy ministers. The media and markets pay a lot of attention.

Reporters who cover OPEC for Reuters, Bloomberg and the Wall Street Journal were not invited to the June meetings. The meetings are happening in Vienna and will end with a decision on production quotas. Accreditation for oil reporters usually starts with an invitation.

The secretariat didn't say why the journalists were excluded from the meetings this week. CNBC said it was even stranger that two Wall Street Journal reporters who don't usually cover OPEC got invitations.

OPEC is blocking journalists who don't report favorably and we don't know who they are.

Saudi Arabia is taking strict actions after a story said that tensions between them and Russia are increasing. Russia is flooding the market with cheap crude, which is stopping Saudi Arabia from raising energy prices.

On May 24, Bloomberg said they expect OPEC to not cut production next week. Even though Saudi Arabia warned short sellers.

On May 25, Reuters reported that there are more people betting that oil prices will drop before the OPEC+ policy meeting on June 4. They call this kind of bet a "short position."

Reports say that OPEC+ may not need to cut production further. This is because demand is expected to increase.

Many energy analysts have been saying the same thing. Summer travels use a lot of oil, and it's the time of the year when prices are likely to stay above $70 (possibly even reach $80, which is what OPEC wants). This is something known by those involved in the oil trade, including those who sell short.

Some people are worried about the economy and think there might be a recession. They are also worried about inflation not being controlled well enough for interest rates to be kept steady. However, interest rates have been paused anyway.

Citigroup said on Thursday that during the summer, more oil is needed for cooling purposes in Saudi Arabia and other Middle East/African states. This means that more oil will be required in OPEC+’s biggest export volumes. The group's barrels are likely to tighten.

Is it really a problem if media companies suggest that it's best for production to continue, especially with OPEC+ ready to make more cuts if needed? Why do some media reports think it's wrong for the group to enforce the two rounds of cuts they already announced, which add up to 3.7 million barrels?

The Wall Street Journal says the Russians may be lying about cutting oil production. They said they cut 500,000 barrels a day, but in May they shipped more oil than they did in 2022 before the war in Ukraine and sanctions.

Financial Times was one of the few publications whose oil reporters were not affected by the media blockade. They reported that...

Saudi Arabia has to reduce its oil production. Russia doesn't have to, but they might lose out if they don't. If Saudi Arabia cuts and Russia doesn't, then Saudi Arabia will sell more oil in Asia. This means Russia will lose market share in Asia.

Oil traders know that if there are more cuts, the Saudis will do most of the work. Last time, in April, the Saudis offered to cut 500,000 barrels per day. Other countries agreed to cut smaller amounts. We don't know if everyone kept their promises.

Let's talk about the media strike. OPEC has always been covered by news organizations, but they report what they want. Oil reporters try to get the best scoop and sometimes share stories that aren't so nice about OPEC. They don't just wait for OPEC to give them information.

The Financial Times talked about unorganized coverage of OPEC meetings. Ministers would say things to reporters waiting in hotels. Sometimes, meetings would end without a clear agreement and reporters would chase the ministers in the streets. This happened in Vienna.

Oil prices can change a lot between OPEC meetings. Journalists don't feel bad about their job. The pandemic meant there were no real OPEC meetings for two years. They restarted last October, but most meetings since then were online. This week's meeting is face-to-face.

News reports say that Reuters, Bloomberg, and The Wall Street Journal will send their top reporters to Vienna despite not being able to access the OPEC Secretariat. This will happen on Friday.

The OPEC Secretariat's actions this week were not just about reacting to a few media outlets or reporters. There must be more to it.

John Kilduff believes there is more to OPEC than what we see. He has been following them for almost 20 years. He started as an oil analyst and became a trader. Later, he became a partner at an energy hedge fund.

The situation is about control and showing dominance. This is what dictators do - they take over the media or punish them to make them more obedient. OPEC now has more control over pricing than in the previous 20 years and is attempting to control the market, including the media.

OPEC owns the commodity, but how it's traded and priced affects global buyers and consumers. The media has the right to question and be critical of OPEC. OPEC must accommodate all media. Efficient markets need free and efficient information. Selective strikes against journalists are not helpful.

Threats against oil traders don't work.

OPEC is influenced by Saudi Arabia's leaders. Abdulaziz bin Salman, who became energy minister four years ago, wants to hurt short-sellers in oil. He threatens to use price spikes from production cuts to make them "ouch."

Abdulaziz likes being known as the 'Dirty Harry' of oil. He started liking this after becoming the head of oil in 2019. He told the 'bears' in the market to 'Go Ahead, Make My Day'. This line is from a Hollywood movie cop. Abdulaziz fights hard against short-sellers. Short-sellers try to keep crude oil prices low.

Abdulaziz, who is the Saudi Arabia oil minister, threatened those betting on lower oil prices. He wants the price of oil to be $80 a barrel or more. People are saying he is acting on his own and his half-brother, Crown Prince Mohammed bin Salman's whim. Abdulaziz's recent threat is seen as a reason for action taken against some media outlets. These media outlets made light of the Saudi minister's threat when the price of a barrel fell below $70. The threat was made before this week's OPEC meeting.

The Financial Times said that Abdulaziz, an energy trader from Russia, could be in trouble. They quoted Adi Imsirovic, who said that Abdulaziz might have made a mistake. This is because he talked about cutting the production of oil again. But if he doesn't do it, prices might go down. Imsirovic said that Abdulaziz was speaking without thinking about the consequences.

Citigroup made a statement on Thursday about the situation.

Maybe OPEC+ needs to make another cut to show that they are serious. They want to remind the market that it might be a good idea.

It can prove to skeptics who is in charge in this market.

This article is for educational purposes only. It's not a suggestion to buy or sell anything. The writer, Barani Krishnan, doesn't invest in these commodities. He uses multiple perspectives to analyze the market. Sometimes, he presents opposing views for neutrality.