{"id":63391,"date":"2022-08-28T06:40:59","date_gmt":"2022-08-28T11:40:59","guid":{"rendered":"https:\/\/olduvai.ca\/?p=63391"},"modified":"2022-08-28T06:40:59","modified_gmt":"2022-08-28T11:40:59","slug":"saudi-prince-delivers-a-message-about-the-second-cold-war","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=63391","title":{"rendered":"Saudi Prince Delivers a Message About the Second Cold War"},"content":{"rendered":"
\n
\n

SAUDI PRINCE DELIVERS A MESSAGE ABOUT THE SECOND COLD WAR<\/a><\/h3>\n<\/div>\n<\/div>\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\"\"<\/div>\n<\/div>\n<\/div>\n
\n

Saudi Prince Abdulaziz bin Salman (ABS) said this week that OPEC+ may need to cut oil production. This may be necessary, he said, to correct problems in the market because\u00a0\u201cthe\u00a0paper and physical markets<\/a>\u00a0have become increasingly more disconnected.\u201d<\/p>\n

This is rhetorical theater. It has no real basis is fact. But that\u2019s not what this is really about.<\/p>\n

This is about the second Cold War to create new world order.<\/p>\n

In a written statement to\u00a0Bloomberg<\/a>, ABS stated,<\/p>\n

The paper oil market has fallen into a self-perpetuating vicious circle of very thin liquidity and extreme volatility undermining the market\u2019s essential function of efficient price discovery.
\n\u2013Abdulaziz bin Salman<\/p><\/blockquote>\n

It is true that volatility has been extreme since the Russian invasion of Ukraine in late February, 2022 but that was nearly six months ago. The worst of the volatility ended in April so the timing of ABS\u2019s comments makes little sense based on oil-market technical concerns.<\/p>\n

Liquidity and volatility are inversely related. When volatility is high, investors are reluctant to invest in futures contracts. That\u2019s because the price variance is too high to make manage risk. With limited capital flowing in and out of oil markets, it is difficult to convert an asset\/contract into cash. High volatility begets low liquidity.<\/p>\n

ABS\u2019s distinction between the futures (paper) and physical (spot) markets does not survive the light of day.<\/p>\n

Figure 1 shows Brent futures price (red), futures price volatility (blue) and 2021 average price volatility (dashed blue). Both price and price volatility increased after Russia\u2019s invasion of Ukraine in late February of 2022. Volatility decreased in April but has not returned to the pre-invasion 2021 volatility average.<\/p>\n

\"\"
Figure 1. Brent oil-price volatility & futures price both increased with Russia\u2019s invasion of Ukraine in late February 2022. Source: CME, EIA & Labyrinth Consulting Services, Inc.<\/figcaption><\/figure>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

SAUDI PRINCE DELIVERS A MESSAGE ABOUT THE SECOND COLD WAR Saudi Prince Abdulaziz bin Salman (ABS) said this week that OPEC+ may need to cut oil production. This may be necessary, he said, to correct problems in the market because\u00a0\u201cthe\u00a0paper and physical markets\u00a0have become increasingly more disconnected.\u201d This is rhetorical theater. It has no real […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[3,5],"tags":[8195,149,25704,701],"class_list":["post-63391","post","type-post","status-publish","format-standard","hentry","category-energy-2","category-geopolitics","tag-art-berman","tag-cold-war","tag-opec-2","tag-saudi-arabia"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/63391","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=63391"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/63391\/revisions"}],"predecessor-version":[{"id":63392,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/63391\/revisions\/63392"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=63391"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=63391"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=63391"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}