Back from Jeddah after a grueling, yet excitingly refreshing and literally reinvigorating beginning to the week — courtesy the Jeddah Energy Meeting —issues continue to haunt and overlap the markets and the sentiments. And markets go by sentiments — one cannot help deducing.
The Jeddah congregation turned out to be an exciting platform — with adrenaline flowing — for virtually the entire global energy fraternity was there huddled together, discussing and striving to somehow rein in the bull — if ever they could!
Sunday was a star-studded day in every sense of the word, with virtually everyone in the who’s who list of the energy world present under the roof at Jeddah Hilton. And with security impregnable, the mood was extremely somber and serious — for obvious reasons. The entire energy fraternity was up on the crucifier, under intense global focus — expected to achieve the impossible of bringing together the conflicting and clashing interests not only on one platform but also to some sort of understanding — an ominous task indeed in real, real sense. Talking of energy, passions run high and divisions go deep; one could definitely feel while at the Hilton that Sunday. Where to point the finger was the billion-dollar question before the pundits. For only once the culprit is identified that the process of controlling and countering could begin.
Not an easy task by any means — full of political landmines. As the sun set in after an hectic day of meeting and talking — and indeed eating and drinking too — while summing up the entire situation, a senior energy analyst very rightly said: Take politics out of the energy equation and things would stabilize — easier said than done. For politics and energy go hand in hand, one cannot help underlining despite the risk of repetition in these very columns.
The tone was set with the host King Abdullah clarifying, emphasizing and underlining that the OPEC was no more dictating and setting oil prices. Despite the fact that for decades the OPEC has left the issue of crude pricing to the market forces, and despite the keenness of the producers in meeting the growing global demand, the King lamented that the OPEC was not being appreciated and accusations were still coming its way.
And with heavy weights including Gordon Brown and Samuel Bodman mincing no words in expressing openly their viewpoint — blaming the fundamentals with onus on producers — engineer Naimi — the ‘Silent Saudi’ — had a cutout task in hand. He had to defend and push forward the producers’ viewpoint before the august gathering. He had to stand up. And he did so deftly and calmly — shredding the counter arguments to literal pieces.
Delineating the role and the contribution of speculators in the industry, he coolly argued the case with mathematical precision. ‘Price rises and volatility are being fuelled by a wide range of other factors which lie beyond the ability of the petroleum industry to address or even influence. Perhaps foremost among these are the recent trends in the global financial markets, including weak equity and bond markets that have encouraged investors to move their capital into commodities like oil. Consider that the bond and equity markets in the US alone are valued at roughly $50 trillion, and that if money managers decided to reallocate a nominal one-half-of-one percent of those assets into the oil commodity space, the resulting $250 billion influx of funds would equal the value of the entire NYMEX WTI markets.’ The minister indeed had a point!
And in this context, the issue of transparency, covering virtually all the spheres of the energy world cannot be overemphasized. For the markets to be back to senses, be able to work on fundamentals rather than perceptions, transparency in all aspects are a must and it’s importance was not missed at the conference too with a number of speakers, from both sides of the divide, pointing toward the crucial need of transparency in soothing down the edgy and itchy markets.
While taking politics out of the energy markets almost impossible, many felt in diplomatic terms, the unprecedented joint communiqué issued at the end of the summit could easily be regarded as a success of the entire exercise — for it was neither possible nor realistic to expect the conference to bridge the gap between the two sides of the global energy equation during its one day deliberation.
Noe van Hulst, the secretary general of the Riyadh-based International Energy Forum, thus strongly felt the conference definitely passed on a positive message to the markets.
No one expected the conference to be able to tame the bull the next day. But a process seems to have been set into motion — definitely — and that is important. A working group to follow up on the deliberations has been set up, discussions are set to continue and London is to host the next one — perhaps at an even higher level. With the two sides on talking terms, the world could expect a miracle to finally happen — some day.
