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Saudi Oil Minister Is Said to Have Met Top Commodity Hedge Funds


Khalid Al-Falih, Saudi Arabia’s energy minister, met in private with some of the world’s top commodity hedge funds in July, taking the unusual step of personally canvassing investor views on the state of the market.

In the past, Saudi Arabian officials have disparaged hedge funds as unhelpful speculators that undermined OPEC’s quest for market stability. Last month’s meetings, described by people familiar with the encounters, signal the world’s largest exporter has reassessed the role of financial investors in the global oil market.

Al-Falih met the oil investors and traders in London days before traveling to St. Petersburg where OPEC and non-OPEC ministers discussed the market, the same people said, asking not to be identified because the talks were private. Although Saudi officials have met in the past with hedge funds representatives, it’s the first time meetings involving the minister have been reported.

Al-Falih met Pierre Andurand, the founder of an eponymous fund with more than $1 billion in assets, and Jonathan Goldberg, the former Goldman Sachs Group Inc. trader who founded BBL Commodities LP, the people said. He also met with traders including Alex Beard, the head of oil at Glencore Plc, the world’s largest commodities house.

Michael Klein, the former Citigroup Inc. investment banker who runs his own advisory firm and is advising on the share sale of giant state oil producer Saudi Aramco, participated in the meetings.

“The Minister is a frequent traveler. As part of his travel schedule, he holds multiple meetings during his trips. We do not disclose the participants of these private meetings nor their content, if and when they happen,” the Saudi Energy Ministry said in a statement. Andurand, BBL and Glencore declined to comment. A representative for Klein declined to comment.

Al-Falih asked the oil traders why the Organization of Petroleum Exporting Countries had achieved only partial success reviving the market and what else the group could do to push prices higher. He also sought views on suggestions from some Wall Street banks that Saudi Arabia should target forward prices to end contango, the market structure where people pay less for oil delivered today than barrels supplied in the future.

Contango has allowed some U.S. shale producers to hedge forward production and lock in profits, making it more difficult for OPEC to wrest back control of the oil market.

In recent months, Goldman Sachs has been among banks and brokers that said accelerating the end of contango and pushing the oil market into backwardation — when spot prices are higher than forward prices — would deter shale producers.

One way to achieve that would be for Saudi Arabia to start forward sales of its own crude, imitating the Mexican government’s oil hedge program. While Al-Falih sought views on the idea, it’s unclear whether the Saudi minister supports the idea or whether he was simply testing it, according to people familiar with the conversations.

In any case, the funds told the minister that the strategy would likely backfire and lead to lower prices across the whole futures curve, one of the people said.

Shortly after the meetings in London, Al-Falih traveled to St. Petersburg to meet other oil-producing countries. At that summit, the Saudi minister briefed fellow ministers on his conversations with the funds and trading houses, according to the people.

In particular, the Saudi minister told ministers that the people he spoke to considered it key that OPEC focus on oil export levels and not just production.

In public, Saudi Arabia has put on a brave face about the effectiveness of its strategy of production cuts to turn around the market. In December, Riyadh rallied a group of 24 countries to reduce output by 1.8 million barrels a day in an effort lift prices.

The curbs initially worked, boosting Brent crude, the global benchmark, to $54 a barrel in New York in February. But as U.S. shale producers reacted to higher prices pumping more, prices fell again.

Al-Falih has urged fellow OPEC countries to stop undermining the cuts by exceeding their output targets and talking about future expansion plans, according to people briefed on his views.


5 Comments on "Saudi Oil Minister Is Said to Have Met Top Commodity Hedge Funds"

  1. bobinget on Fri, 4th Aug 2017 4:58 pm 

    Any hurricane potential aside, the so called ‘draw’
    this coming Wednesday will be OVER seven million barrels. This will mark the eighth week of crude withdrawals not including SPR sales.

    Hurricane warnings in the GOM will, if nothing else,
    restrict shipping. IOW’s, only Canada/Mexico contribute to America’s stock-pile or as one poster here puts it ‘glut’. Should East coast shipping be restricted all week, look for a massive short-fall.

    Should GOM production be curtailed, look for humongous shortfall combined with refinery

    Should this double header cause significant tidal, damage, we are, as the old sage put it,

    If any of these disasters come to pass, it will mask
    the lack of Venezuelan crude. If a THIRD and more deadly storm forming off shore Nigeria, drop into the GOM low. I have no worthy expletive.

    God help TX, LA and Mississippi costal residents.

  2. shortonoil on Fri, 4th Aug 2017 10:56 pm 

    With the Saudis now attacking their own cities in their oil district the situation is not likely to improve.

  3. Cloggie on Sat, 5th Aug 2017 12:12 am 

    That is quite a development in KSA;

    The KSA oil-rich Shia-dominated provinces in the east are probing an uprising, no doubt inspired bij the developments in Iraq and Syria and Yemen and the SCO-victory over the West in Syria. KSA could fall apart as a result. The Saudi’s always were against the US invasion of Iraq and now it becomes clear why. If this escalates, peak oil supply could happen after all, not because of depletion, but because of war in the Gulf.

  4. Apneaman on Sat, 5th Aug 2017 2:45 am 

    clog were you out marching the other day?

    Canadians welcomed as heroes in the Netherlands

    “Over a million Canadian men and women served during the Second World War.

    Forty-two thousand Canadians lost their lives.

    About 7,600 Canadians died during the nine months it took to liberate the Netherlands.”

    “Never did I expect that moving to the Netherlands would connect me with my Canadian heritage. Being witness to the extent of the celebrations held by the Dutch to honour Canadians, and meeting Canadian soldiers, Canadian citizens, and now-grown children of the Second World War, has brought a history to life that I thought no longer impacted me.”

    Awwwwww Thanks clog. That’s real sweet of y’all dutch folk.

  5. Cloggie on Sat, 5th Aug 2017 3:16 am 

    Awwwwww Thanks clog. That’s real sweet of y’all dutch folk.

    Of all the countries in the world, Canada was by far the most popular destination for impoverished 1940s/1950s Dutch.

    And yes, the Anglos are popular in Holland, a country I see as the cradle of Anglosphere. Holland fought hard to defeat Catholicism (read: the Middle Ages) in the 16th/17th century and won and exported the Capitalist-Protestant revolution to Britain during the Dutch conquest of Britain and Northern Ireland of 1688. And these Calvinists landed in North-America and bring some civilization in that wilderness there by starting the New Netherlands (Nieuw Amsterdam/”New York”) and New England (Boston) projects.

    Holland is essentially Germany, f* we are even blonder then them, but with one very large difference: Hollanders look West, over seas, the natural born imperialists that they are, where Germans look East. Hollanders are Anglo-Germans.

    There are still all sorts of initiatives in The Netherlands to keep the memory towards the “liberation” alive (in essence the destruction of the Dutch empire and imposition of leftist values and disastrous multicult and Holland itself being added to the US empire), like “keep them rollin”, all Anglo army vehicles:

    I hold no grudge against the Canadians or other Anglos, which can’t be said of your tribe. They were just carrying out orders from the Anglo-Zionist kosher deep state, that began to grow sine 1933, without realizing it. They don’t even understand it today. And I feel a little sorry for the Europeans in North-America because I know what is going to happen to them and it ain’t pretty, in the worst case the Gulag, run by BLM thugs. If they are lucky, half of them end up in a European Commonwealth.

    (Bit of an exaggeration though, these Canadian troops are participating in the Vierdaagse, a four day, 4×50 km marching event, where people and troops from all over the world participate, so it was not a WW2 commemoration or Canadian-centric event, although I am sure they got more applause than the rest).

    Meanwhile the whole world is preparing for WW3, which will lead to the downfall of America away from global hegemony aspirations:

    Which will mean the end of the Anglo-Soviet, read Jewish communist 20th century.

    Happy downfall, Apneaman, mazzeltov!

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