Oil pars losses as Saudi minister warns of market volatility

(Bloomberg) — Oil pared losses after Saudi Arabia’s Oil Minister Prince Abdulaziz bin Salman said a disconnect between the futures market and supply fundamentals could force OPEC and its allies to act.

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West Texas Intermediate futures rebounded to around $90 a barrel after earlier trading below $87 on Monday. The Saudi oil chief has warned that “extreme” volatility and a lack of liquidity in the futures market is driving prices in ways that do not match fundamental supply and demand factors. The divergence could prompt the OPEC+ alliance to act, Bloomberg News reported.

So far this month, prices have fluctuated wildly within about $13.

The physical supply constraint could worsen as Kazakhstan’s Caspian Pipeline Consortium faces more disruptions following the failure of two key berths.

Prices fell earlier in the session after US President Joe Biden held talks with leaders from France, Germany and the UK about reviving the Iran nuclear deal, a step that is likely to allow more crude supplies from OPEC .

China is also said to be planning a series of special loans to boost support for its beleaguered property market, the latest sign that the world’s biggest crude importer is trying to shore up its economy. The apparent need for such a stimulus has exacerbated fears of a global slowdown.

Rising long-haul cargo flows into Asia from regions such as the US, which take twice as long as Middle Eastern barrels to reach buyers, have forced spot premiums for Gulf barrels lower in the trading cycle this month. Meanwhile, options markets were pricing in increasing premiums for bearish put contracts that would win the buyer if prices fell.

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