Saudi Energy Minister Warns Short Sellers of Pain as OPEC + Meeting Looms

The Saudi Energy Minister, Abdulaziz bin Salman, vowed, on Tuesday, to speculators in the oil markets, or the so-called short sellers, that they would be “in pain,” before a scheduled meeting of the “OPEC +” alliance on the fourth of next June to discuss oil policy.

The Saudi minister said, during his speech at the Qatar Economic Forum, according to Reuters: “The speculators, as is the case in any market, will remain. I constantly tell them that they will suffer. They suffered in April. I do not have to reveal my papers.. but I will just tell them to beware.”

He also made it clear that the coalition will continue its proactive and preventive work from what may happen in the future, without regard to any criticism, adding, “We must be brave enough to take care of the future without continuing … those policies that may allow us to manage the situation for this month, the next month, or the next month.” the next, but we lose sight of our most important intentions and goals.”

And he considered that the “OPEC +” alliance, which includes the Organization of the Petroleum Exporting Countries “OPEC” and other allies, including Russia, works in an orderly and responsible manner for the oil market.

In the wake of the Saudi minister’s statements, oil prices rose today, thanks to expectations of a decline in supplies amid a seasonal increase in gasoline demand and a reduction in “OPEC +” production, and Brent crude futures increased 57 cents, or 0.8 percent, to $ 76.56 a barrel, while the US West Texas Intermediate crude rose. 42 cents, or 0.6 percent, to $72.47 a barrel, according to Reuters.

Both benchmarks rose on Monday, following a 2.8 percent rise in US gasoline futures ahead of the May 29 Memorial Day holiday, which usually marks the start of the peak summer fuel demand season.

What is “short selling”?

People usually buy stocks, whether oil or others, at a lower price, and make profits by selling them at a higher price as prices rise.

But when prices are heading downward, some decide to use the method of speculation or what is known as short selling or “short selling”, where a person borrows future oil contracts from a broker at a certain price and sells them on oil exchanges at the market price.

After the drop in oil prices, and before the maturity of the futures contracts, the person buys the contracts again at lower prices and returns them to the broker again to make a profit from the price difference.

According to the official website of the Securities and Exchange Commission in the United States, the great activity of short selling operations can lead to sudden drops in prices, which weakens investor confidence and reduces the marketing value of a company’s name.

According to Bloomberg, the speculation here is a pessimistic movement where you expect a decline and a decline in stocks, which is a very dangerous strategy in trading and requires careful monitoring of the market movement.

She added that the current market data suggests that oil speculators have begun to return to their usual policy, despite receiving a strong loss last month, after the “OPEC +” alliance approved sudden production cuts to raise oil prices, and the indicators on which these speculators rely expect a drop in oil prices. After the decisions of “OPEC +” at its meeting next month.

And Saudi Arabia and other members of “OPEC +” announced, in early April, a new cut in oil production by about 1.2 million barrels per day.

This followed the decision to cut production in late 2022 to support the market as the economic outlook deteriorated, which affected prices.

Washington considered that last month’s cuts were “unwise,” to add to its criticism of the decision to cut basic production last October.

Bloomberg quoted analysts Paul Hrosnell and Emily Ashford of Standard Chartered Bank, that the current expectations of speculators may make the prominent members of OPEC move towards a new cut as a defense against speculation.

The Iraqi Oil Minister, Hayan Abdul-Ghani, told Reuters in the middle of last month that his country does not expect an “OPEC +” agreement on a new reduction in oil production during its meeting in June, in the first indication from an OPEC minister to the possible decision during the meeting in light of the decline in oil prices. oil.

Abdul-Ghani said, “In the next meeting, which will be held on the third and fourth of June, there will be no additional reduction, and for Iraq, we cannot reduce.”

Charged by the International Energy Agency

In light of the “short selling” relying on analyzes and expectations, the Saudi Energy Minister, during his speech on Tuesday, accused the International Energy Agency, again, of being responsible for misleading the market with its initial expectations of a decline in Russian production of three million barrels per day, due to the war in Ukraine.

“Look who’s the biggest contributor trying to stir up speculation, data and projections that really drove most of the volatility we’ve seen in 2022 and still have?” he said.

“There is an organization called the International Energy Agency, which I think has proven that it takes a really special talent to be constantly wrong,” he added.

The International Energy Agency did not immediately respond to a Reuters request for comment.