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Oil prices have whipsawed back and forth over the past two weeks, largely due to the rise and fall of expectations that OPEC might call an emergency meeting.
Comments from several Russian oil executives and government officials sent oil prices surging at the end of January. Then prices retraced their gains when officials from OPEC dismissed the stories as just rumors. Nothing had changed, OPEC officials argued, even though some people in Russia were hinting at a meeting.
But the rumors persist. The latest fuel to the rumor fire is the fact that now six OPEC member states have said that they would be willing to attend an emergency meeting if one was called, the highest total yet. Venezuela has officially requested an emergency meeting, and the oil minister from the South American OPEC member said that six OPEC members plus two non-members are willing to discuss measures to stabilize oil prices.
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The list includes Iraq, Algeria, Nigeria, Ecuador, Iran, and of course Venezuela. Russia and Oman, two non-OPEC members, would also be willing to attend. “The idea is to not just hold a meeting, but for all the countries to attend with the intention of reaching agreements,” Venezuela’s oil minister Eulogio Del Pino said in the statement. “Current prices are below equilibrium, and that encourages the speculators and market instability.”
The last statement is especially true – oil markets are at their most volatile point in years. The price movements over the past few weeks have been large and extreme. But speculators are starting to take much more bullish positions on crude oil, closing out net-short positions and going long. That suggests that a more solid price rally could be just around the corner – or, at least, speculators think that might be the case.
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A rally will depend on the fundamentals, however, which is why a potential emergency OPEC meeting looms so large over the oil markets. Much now depends on Saudi Arabia’s position, the most powerful member of OPEC. Saudi Arabia has suggested in the past that it would be open to coordinated production cuts if Russia came along. There are still a lot of hurdles that would need to be cleared for cooperation between all the parties involved, but Venezuela is doing its best to get everyone on board.
By Charles Kennedy of Oilprice.com
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Charles is a writer for Oilprice.com