Central bankers have long understood that a few well-placed words can wield nearly as much power as pulling the actual levers of monetary policy. It is a lesson that Opec and Saudi Arabia has started to heed. Just a few short sentences from Saudi Arabia’s energy minister Khalid al-Falih last week sent hedge funds scrambling to cover large bets against the oil price, subsequently propelling Brent crude 10 per cent higher and largely silencing fears the market was on the cusp of another rout.
Following calls from Venezuela for big producers to revisit the idea of freezing output, Mr Falih said the kingdom was willing to “discuss any possible action” needed “to stabilise” prices when Opec ministers gather informally at a conference next month. For those that had written off Opec and Saudi Arabia’s position as “the central bank of oil” the market’s reaction was notable. Most long-term Opec watchers expect no official agreement to emerge from the Algeria gathering, even as oil-dependent economies struggle under the weight of a two-year price collapse. Still, prices shot higher at the mere threat of action. “A lot of traders appear to hold the view that eventually there’s going to be so much pain among Opec that they’ll have to do something,” says Jamie Webster of Columbia University’s Center on Global Energy Policy. “I don’t see anything to make me think
Most long-term Opec watchers expect no official agreement to emerge from the Algeria gathering, even as oil-dependent economies struggle under the weight of a two-year price collapse. Still, prices shot higher at the mere threat of action. “A lot of traders appear to hold the view that eventually there’s going to be so much pain among Opec that they’ll have to do something,” says Jamie Webster of Columbia University’s Center on Global Energy Policy. “I don’t see anything to make me think outcome is going to be different this time.”