The International Energy Agency (IEA), International Energy Forum (IEF) and the Organisation of the Petroleum Exporting Countries (OPEC) held the ninth Joint IEA-IEF-OPEC Workshop on Interactions between Physical and Financial Energy Markets
The high-level meeting was chaired by Ayed S Al-Qahtani, director of OPEC’s research division, together with IEF secretary general, Joseph McMonigle, and Toril Bosoni, head of the IEA’s oil industry and markets division.
In pre-recorded welcoming remarks, OPEC secretary general, Haitham Al Ghais, said, “What this past year has shown us is the need for the continued monitoring of factors driving volatility in energy-related financial markets, and how it can impact not only the short term, but the medium and long term too.”
He highlighted that, when required, OPEC member countries and their partners within the Declaration of Cooperation have 'undertaken extraordinary efforts to stabilise the oil market in these extraordinary times, in the interests of producers, consumers, the oil industry and the wider global economy. This is on the physical side of the oil market. On the financial side, we have been observing an accelerated trend in speculative trading, with investors and other players trading futures and options at faster rates, sometimes severely impacting market liquidity and hindering price discovery mechanisms'.
In his opening remarks, McMonigle said, “Both financial and physical markets continue to tighten. Rising inflation and underinvestment in physical supplies expose new vulnerabilities. Producers and consumers must have this in mind when engaging risk in investment or to understand the evolution of energy costs for consumers.”
Bosoni confirmed that volatility remains a risk for energy markets. The last three years have underlined the impact of supply and demand shocks as well as of financial markets for energy price movements. The broader consequences concern particularly inflation as well as investment to meet supply and respond to the energy transition. The IEA appreciates the depth and expertise shared by today’s speakers that brought substantial insight to the discussion.
Discussions during the workshop were structured into three sessions, grouped around the theme 'Spot and paper markets: divergent trends amid low liquidity in futures markets'.
The first session was on the ‘Factors driving volatility in the energy-related financial markets'. This was followed by a second session which considered the ‘Impact of physical and paper oil interactions on market functioning and price discovery’. The third and final session covered ‘Ensuring adequate financing to sustain oil and gas developments’.
The Joint Workshop is a part of the trilateral work programme established by the three organisations and endorsed by energy ministers at the 12th International Energy Forum in Cancún, Mexico, in March 2010. Since then, the joint IEA-IEF-OPEC meetings covering the evolving inter-linkages between physical and financial energy markets have developed into a unique, high-level technical event that bring together a diverse range of market participants to discuss issues that are not addressed in other high-level fora.
