Opec once decried hedge funds as a malign influence on the oil market. Now it is seeking their opinion.
Mohammad Barkindo, secretary-general of the oil exporters’ cartel, said on Tuesday he was meeting fund managers while in Houston for an energy conference this week, giving them his time along with US shale executives and other senior figures in energy circles.
The overtures are a change for Opec, which historically lashed out at “speculators” for distorting the price of crude. But financial participants have become too large a presence to ignore.
“Times have changed; the industry has changed,” Mr Barkindo told reporters at the CERAWeek by IHS Markit conference. “We are more globalised, and the impact of the financial markets on oil continues to be magnified. And in this world we believe that we should adapt to these new changes and therefore reach out.”
Hedge funds and other money managers have built a net bullish futures position worth nearly 1bn barrels of crude oil, recently the biggest on record. The position expanded after Opec reached an agreement to cut output on November 30.
While Opec’s output decisions directly affect oil prices, its leaders have in the past blamed speculators when prices move too low or high for the comfort of producers or consumers. “Like puppeteers, they pull the strings from the wings, manipulating positions and unsettling what are already delicate and often precarious trading environments,” the official Opec Bulletin said in a commentary in 2015.
That view contradicted experts who generally say speculators serve a purpose by making markets liquid, even if they occasionally push prices in a direction seemingly at odds with data on supply and demand.
But Mr Barkindo, appointed last year, said fund managers were “key participants” in the oil market, adding that Opec, the International Energy Agency and the International Energy Forum planned to hold a workshop in Vienna next week to focus on the effects of financial players.
After meeting with fund managers in Houston “we found that thin line that probably differentiated us was just probably fictitious”, said Mr Barkindo, a longtime Opec delegate from Nigeria. “We all belong to the same industry. We sail in the same boat.”
Opec officials have recently met with hedge funds in London and New York, the Wall Street Journal reported this week. Saudi Arabia, the de facto leader of Opec, convened private talks with the world’s largest oil traders including Pierre Andurand, who runs a London-based hedge fund, before the pivotal November Opec meeting, the FT has reported.
Despite hedge funds’ massive bets, the price of crude oil has been locked in a narrow range. ICE Brent crude oil for May delivery was down $55.60 a barrel on Tuesday, down 0.7 per cent.
