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Julianne Geiger

Julianne Geiger

Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.

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OPEC+’s Complains About Volatility, But Here’s What They Really Want

  • Numerous OPEC+ ministers have bemoaned oil prices volatility in recent weeks.
  • Standard Chartered: when OPEC+ says volatility, what they really mean is ‘falling crude prices’
  • StanChart sees oil’s fundamentals as “far weaker in Q2 and Q3 than they were in Q1, and that, not fake news, has been the key driver of prices.”.

Numerous OPEC+ ministers have closed ranks over the last week to bemoan oil price volatility. Accusations of misleading weakening demand figures and the disconnect between the physical and paper markets are really code for one thing, according to a Standard Chartered report: they want higher prices.

Libya’s oil minister Mohamed Oun, for example, has blamed what he calls “heightened volatility” on “misleading news and stories about global oil demand and supplies,” all of which “have sent wrong signals to all market participants.”

But as StanChart pointed out, when some OPEC+ ministers say “volatility”, what they really mean is “falling prices.”

The realized volatility for Brent of which Oun speaks is currently 44%--only 4ppt higher year over year, StanChart said.

As for the accusations that the market has been force-fed misleading demand figures, this is a more complex issue, but one that StanChart says still can be debunked, using U.S. gasoline demand as a piece of the puzzle. U.S. gasoline demand—which accounts for 9% of global oil demand—has weakened in Q2 and Q3, with five months in a row of year-over-year declines.

In support of OPEC+’s complaint that demand could be higher than what is being reported, August’s demand figures (-2.6% y/y) are better than July’s (-7% y/y).

Source: EIA, Standard Chartered

The argument could also be made here that the revised monthly demand data—which only runs through May--is significantly more accurate than the weekly figures, which are being used to suggest demand is slackening in June, July, and August.

Still, StanChart sees oil’s fundamentals as “far weaker in Q2 and Q3 than they were in Q1, and that, not fake news, has been the key driver of prices.”

OPEC+ has threatened to cut production to rectify the disconnect they see between the paper and physical markets and curb this “volatility.”

By Julianne Geiger for Oilprice.com

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Leave a comment
  • WayneBrown on August 27 2022 said:
    Personal gas Demand USA
    As prices rise in May and June at the pump people filled up because next time it will cost more .
    As prices started to fall July August
    people drove until tank almost empty as next fill up will be less..

    The demand is level , gas is stored in auto gas tank or used up depending on
    Rise and fall price at the pump.
  • Kiers S on September 01 2022 said:
    StanChart jingoism is really not gonna solve the world's problems. Most of these opec+ are developing countries. They use government fiscal spending in local currencies on oil capex. In an ever rising dollar interest rate environment, the global so-called macroeconomic dollar standard is not structured to encourage high fiscal when the developing country sees it's currency drop. GET REAL stan chart. YOu're supposed to be a BANK. Of all people you know macro e-con-omics has different rules for different currencies.

    Besides, Shale oil producers get all kinds of subsidies and look forward to high oil prices just the same....but that's....."officially encouraged". I would like to see stan chart take on the Koch bros. I really would. But the brits being brits....

Leave a comment

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