Poor liquidity, sharp fluctuations behind oil prices decline
An oil field in Iraq. Photo: CNBC Arabia
Baghdad (IraqiNews.com) – The poor liquidity and sharp fluctuations in the futures market caused prices to be far from market fundamentals, the State Organization for Marketing of Oil (SOMO) said in a statement endorsing comments made by the Saudi Energy Minister Prince Abdulaziz bin Salman earlier this week.
Saudi Energy Minister Prince Abdulaziz bin Salman said extreme volatility and lack of liquidity means the futures market is increasingly disconnected from fundamentals and OPEC+ may be forced to cut production, according to Bloomberg News.
SOMO added in its statement that Iraq believes that the OPEC+ alliance which includes the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia, will continue to monitor the market and will take the necessary measures to achieve balance in the oil markets.
Prince Abdulaziz represents the largest oil producer in OPEC+ which is arguably the most important player in the 23-nation alliance. He said futures prices do not reflect the underlying fundamentals of supply and demand, which may require the group to tighten production when it meets next month to consider output targets, Bloomberg News mentioned.
The Saudi Energy Minister had stressed that the OPEC+ alliance has the necessary tools to deal with the challenges, and these tools include reducing oil production.