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Quite a few OPEC+ ministers have closed ranks during the last week to bemoan oil value volatility. Accusations of deceptive weakening demand figures and the disconnect between the bodily and paper markets are actually code for one factor, in keeping with a Customary Chartered report: they need larger costs.
Libya’s oil minister Mohamed Oun, for instance, has blamed what he calls “heightened volatility” on “deceptive information and tales about international oil demand and provides,” all of which “have despatched improper indicators to all market members.”
However as StanChart identified, when some OPEC+ ministers say “volatility”, what they actually imply is “falling costs.”
The realized volatility for Brent of which Oun speaks is at present 44%–only 4ppt larger 12 months over 12 months, StanChart stated.
As for the accusations that the market has been force-fed deceptive demand figures, this can be a extra advanced difficulty, however one which StanChart says nonetheless will be debunked, utilizing U.S. gasoline demand as a bit of the puzzle. U.S. gasoline demand—which accounts for 9% of worldwide oil demand—has weakened in Q2 and Q3, with 5 months in a row of year-over-year declines.
In help of OPEC+’s grievance that demand could possibly be larger than what’s being reported, August’s demand figures (-2.6% y/y) are higher than July’s (-7% y/y).
Supply: EIA, Customary Chartered
The argument is also made right here that the revised month-to-month demand information—which solely runs by way of Might–is considerably extra correct than the weekly figures, that are getting used to recommend demand is slackening in June, July, and August.
Nonetheless, StanChart sees oil’s fundamentals as “far weaker in Q2 and Q3 than they have been in Q1, and that, not pretend information, has been the important thing driver of costs.”
OPEC+ has threatened to chop manufacturing to rectify the disconnect they see between the paper and bodily markets and curb this “volatility.”
By Julianne Geiger for Oilprice.com
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