Well, as we have been discussing today's Saudi Arabian energy Minister, Prince Abdelazi's Ben Solomon said, extreme volatility and a lack of liquidity means the futures market is increasingly disconnected from fundamentals and as a result, Pick plus may be forced to cut production. Joining us now to discuss we have
Alan Walge. She is president of Transversal Consulting. So Ellen, is this a fair call from the Saudi minister energy minister cutting production would help to stabilize growing dysfunction and energy markets or does this look like a thinly veiled justification for getting the oil price back up again. M that's a really good question. I think that his statements are very chacteristic of of what we've seen from Prince
Ability so far. There they're actually somewhat cryptic, I think, and um, it's not really clear that he actually does think that the market is oversupplied and that we need to see a cut, but it did seem like he was almost threatening it as kind of a hypothetical. So I don't think we should read too much into the ideas that that he thinks that we need to kind of have some sort of reset by a major production
cut UM. But I do think his his point overall that the markets are extremely volatile, that oil prices are are incredibly volatile, and that they are reacting to things that are not necessarily showing up in the physical market
UM is a very good point. UM. I don't think that UM, you know, OPEC cutting their their production quotas is necessarily going to help fix this unless there's one one way that that might actually help, because UM open plus isn't most members are not producing at their quotas, and the quotas are in fact totally unrealistic production targets for them, And if they did cut back on a lot of these quotas, it might help the market to realize that UM, just because the quotas are high, doesn't
mean that's where production is actually UH is actually heading or can actually get. So it might actually bring a bit of clarity to the market. So, so Ellen, you know you're you're an analyst. When when he talks about the difference between the paper and physical markets, which one
do you think most accurately represents the fundamentals? I think that right now we're really seeing that the the paper market, or it's not really a paper market anymore, but is very much UM reacts to news, kind of overreacts in a way, so we see a lot of the moves kind of UM amplified in a way that we don't
necessarily it doesn't necessarily reflect the physical market UM. So you know, we see a report that you know, something might happen to with UM with the nuclear negotiations with Iran, and suddenly oil prices drop more than they should given
the fact that we're not actually seeing a nuclear deal. Yeah. Well, oil process, to be fair, have been on a pretty wild ride, ranging between the mid sixties too above a hundred and twenty barrel over the past year, but the average over the past five years is about sixty barrel. Can you imagine a scenario where we get back to those labels in a sustainable way? I could see a
time when we do get back. I think that it would require a total end to the hostilities between Russia and Ukraine and all of the Europe and the United States in Asia, to just completely end any kind of sanctions or retribution, and I don't see that happening any
time soon. I think there's a lot of UM push from policymakers to continue this, uh, these actions, So I don't see that in the near future either that or we if we saw a big re found in production, to say from the United States or from another area, which I also don't see is particularly likely in the
next couple of years. In our story, we say that open interest and trading volumes are well below average levels, and that a lot of this is because of the price wings the volatility, uh, some of it coming from the Ukraine war. Uh. Do you see it that way? And does that take you further away from fundamentals or does it actually shrink the market more to real buying
and selling. Actually, I do think in this case it takes us away from the fundamentals because people, many, many people are operating under the impression that more oil had come off the market due to the rush of Ukraine issues then actually had and so we were seeing them react to what they thought was going on or what they thought was happening, as opposed to the actual barrels that we were seeing move on the market. We are
on procession watch at the moment. If we're not already in one, should we have a global recession where two then for oil prices exactly and That's a really good question, because I think a lot of it does depend on the European energy situation and whether we see a lot of switching of UM, you know, of oil for natural gas U. Typically oil prices should go down in a recession.
But if the European energy market continues to not be able to buy natural gas or for natural gas, and instead they are continuing they buy oil UM, that could keep oil prices more elevated than we would normally expect. Or they could or they could turn more to nuclear, which we heard from from Germany, and that might be have the opposite impact. It would the nuclear would take a longer time. I think absolutely up. Thank you, Ellen,
We're out of time. Ellen Wall, President of Transversal Consulting with US