OPEC Asserts Dominance With Media Ban And Market Risks

Despotic leaders hide or silence info they don't like. OPEC did the same by kicking out some news groups from their June meetings. Some see this as a desperate move.

OPEC+ has 13 members from Saudi Arabia. Together with Russia and others, they control about 40% of the world's oil. Meetings happen to decide how much oil to pump every month. The meetings range from technical talks to big decisions made by ministers. Media and markets care a lot about what happens in these meetings.

Reporters from Reuters, Bloomberg, and the Wall Street Journal who cover OPEC didn't get invites to attend the June meetings. The meetings are happening in Vienna and end with a decision on production quotas. The invitations usually start the process for reporters to cover OPEC and its activities.

The secretariat didn't explain why journalists were excluded from this week's meetings. It's weird because two reporters from Wall Street Journal who don't usually cover OPEC were invited. CNBC reported on this.

The reporters who were affected are unknown. However, it is obvious that OPEC is blocking certain journalists. They are targeting those who do not share their views on OPEC.

The Saudis took forceful action. It was because of a story in the Wall Street Journal. The story said tensions were rising between the Saudis and Russians. Moscow keeps pumping cheap crude into the market. This makes it hard for Riyadh to raise energy prices.

Bloomberg wrote something on May 24th. They said OPEC watchers think OPEC won't cut production even though Saudi Arabia warned short sellers.

On May 25, Reuters reported that more people are betting that oil prices will go down. This is happening just before the OPEC+ policy meeting on June 4. Those who bet that prices will go down are called "short positions."

The reports say OPEC+ doesn't need bigger cuts now. Demand may come soon.

Many energy analysts have said that summer travel is a big reason why oil demand is high. This is well-known in the oil trade. Even people who short-sell oil know that consumption will be high. This means a barrel of oil could cost more than $70, and sometimes even more than $80 as OPEC hopes.

People are worried about the economy and recession. They're not sure if inflation will be controlled enough to stop rate hikes. But, despite this, things continue.

In the summer, Saudi Arabia and other OPEC+ countries need more oil for cooling. This increases the demand for oil. Citigroup predicts that the oil supply from OPEC+ will decrease.

Is it bad for media companies to suggest that continuing production with the support of OPEC+ is the best option for now, in case summer demand is not as high as expected? Is it wrong for media reports to suggest that the group should be punished for not fully enforcing the 3.7 million barrel daily cut announced between October and April?

The Wall Street Journal thinks more production cuts could lead to more lying from Russia. Russia says they're cutting 500,000 barrels a day, but in May they actually shipped the most oil since 2022 started. This was before the Ukraine war and sanctions on Moscow.

Financial Times' oil reporters were not affected by the media blockade. They reported on the event.

Saudi Arabia needs to cut production, otherwise they will lose market share in Asia. Russia should also cut production. If Russia doesn't cut production, they will also lose market share in Asia. The two countries need to work together to maintain their market share in Asia.

Oil traders know that if there are more cuts, Saudi Arabia will bear the brunt of it. In the last round of cuts, Saudi Arabia offered to cut the most at 500,000 barrels per day. Other countries like Iraq, the UAE, Kazakhstan, Algeria, Oman, and Kuwait agreed to cut less. We don't know if these countries kept their promises, and we don't know what Russia did.

Let's talk about the strike against biased media. News groups report on OPEC as they want. Oil reporters try to report unique and interesting stories about OPEC, which may not always show them in a good light. They don't just rely on press releases from OPEC.

A Financial Times article talked about how OPEC meetings used to be very messy. Ministers would talk to reporters in hotel lobbies and say things that could affect the market. Sometimes, meetings would end without any official agreement and reporters would chase ministers through the streets of Vienna.

Oil prices can change a lot when OPEC meets and reporters don't feel bad about it. Because of the pandemic, there haven't been many in-person OPEC meetings for two years. But last October they started meeting again, mostly through video or online.

Reporters from top news agencies like Reuters, Bloomberg, and The Wall Street Journal might still go to Vienna on Friday. However, they might not get access to the OPEC Secretariat.

This week, the OPEC Secretariat's actions appear to be more than just a response to certain media or journalists.

John Kilduff has been closely following OPEC for almost 20 years. He began as an oil analyst, then became a trader, and eventually became a partner at an energy hedge fund. He believes that there is something more important than what OPEC is currently doing.

Control is the main goal. Despots show their power by controlling the media or punishing them for bad news. OPEC has more pricing power now than in the past twenty years. They want to control the market, including the media.

OPEC owns the commodity. But the way it's traded, priced, and its impact on buyers is open for media questioning. The media can criticize OPEC when necessary. OPEC must accommodate all media. Information must be efficient and free-flowing for markets to be efficient. Selective strikes on journalists are unhelpful.

Threats against oil traders don't work.

The Saudi leaders affect OPEC's ways. Abdulaziz bin Salman is the Saudi energy minister. He wants to beat the short-sellers in oil. He often threatens to hurt them with price spikes from production cuts. "Ouch" is his favorite word for the harm he aims to cause.

Abdulaziz enjoys being seen as the tough guy of the oil industry. He started this attitude not long after being hired in 2019. He told the people who predicted low prices in the market to "Go Ahead, Make My Day," which is a line from a movie character. Abdulaziz is now even more aggressive towards those who try to lower the prices of oil. These people are called short-sellers, and they play a role in keeping prices fair.

Abdulaziz threatened those who bet on lower oil prices, possibly on behalf of Saudi Crown Prince Mohammed bin Salman. This is one reason why certain media is being targeted for making light of the situation after a barrel fell below $70.

The Financial Times pointed out that a former energy trader for Gazprom, Adi Imsirovic, thinks Abdulaziz may have made a mistake. Abdulaziz said that the group could cut production again. Imsirovic thinks he spoke without thinking through the consequences. If the market thinks you will cut supply and you don't, prices will fall.

Citigroup said Thursday that...

OPEC+ may consider cutting oil output to show a potential need for more restrictions. This would be beneficial for companies and investors in the long run.

It could prove skeptics wrong. It would show them who's in charge.

This article doesn't tell you to buy or sell anything. It only informs you. The person who wrote it, Barani Krishnan, doesn't own anything in the market he talks about. He looks at different opinions and perspectives when analyzing the market. He sometimes shows opinions that go against the mainstream or factors that have an impact. He tries to stay neutral.