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Faced with a wave of speculation on crude futures and shares of oil majors, the oil market could probably benefit from adopting regulation the way banks are regulated, the chief executive of Italy’s major Eni, Claudio Descalzi, told Italian business daily Il Sole 24 Ore in an interview published on Saturday.
Not only rising U.S. supply and geopolitical tensions are weighing on oil prices; there is also unprecedented speculation on futures and shares, which is depressing prices, the manager noted.
Therefore, it could make sense to adopt some form of market control, Descalzi said, adding that OPEC was a kind of regulator in the past, but it no longer plays the role it used to play.
In addition, Descalzi doesn’t believe that it’s possible for OPEC to prop up prices with further cuts, and he doesn’t believe that countries like Saudi Arabia can act unilaterally with consistent production cuts, the manager said in the interview which was also linked to on Eni’s website.
Asked about what his expectations of the ongoing OPEC/non-OPEC monitoring committee meeting in Russia were, Descalzi said he was not optimistic that there would be an agreement on new production cuts to lift the price of oil.
The oil market is in a difficult situation—there is less confidence even by institutional investors who are usually long on oil, the manager added. Even long-term investors have become shorters, and hedge funds and speculators have been given more room to act. Probably they don’t believe that OPEC is capable of taking radical initiatives as it has done in the past, Descalzi told Il Sole 24 Ore.
The sentiment in the oil market has soured so much over the past two months that investors seem to be reacting to every piece of bearish news, and largely ignoring bullish signs from the industry. Money managers had piled up a record number of short positions, amassing 510 million barrels in the major contracts on Brent, WTI, U.S. gasoline, and U.S. heating oil on June 27.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.