Battle of the sources

On Tuesday this week, the Wall Street Journal published an exclusive report citing unnamed sources from OPEC who said that the group was considering suspending — note the wording — Russia from the OPEC+ output agreement so other members could pump more. Oil fell.

A day later, Reuters came out with a report that cited OPEC+ sources as saying the cartel would stick to its original agreement, meaning no one would pump more oil than originally agreed.

In a separate report, Reuters cited not two, not five, but a total of eight OPEC+ sources as saying the Russia’s suspension/exemption from the agreement was not on the agenda.

Energy Intel’s OPEC correspondent Amena Bakr tweeted that there had been no discussion of Russia’s suspension/exemption at the Joint Technical Committee meeting that precedes the main event of the month.

Hours later, the FT joined the party with yet another batch of sources saying Saudi Arabia was ready to boost production and was discussing it with its “Western allies”. Welcome to the wonderful and exciting world of Sourceland.

It is a key rule in journalism that any information needs to be verified by using at least two independent sources. Reuters and the FT are better than that — they each said they had five sources for the information they reported on. On one news report, Reuters had eight. WSJ was citing OPEC delegates. Bakr, too. Yet this information is, not to put too fine a point on it, conflicting. Who do you trust? Easy. The official sources.

There are obvious reasons why certain people who are knowledgeable of some upcoming event or a decision would choose to not do it publicly with their name and position.

Quite often, they have simply not been authorised to talk about the event. Sometimes, they are afraid of repercussions if they talk to the media. And sometimes, just sometimes, they are simply not the most credible sources, so it’s better they remain anonymous. Of course, there are also the made-up “sources” but we don’t consume this sort of media, do we?

Of course, even when sources come out with their name and position, awkward situations sometimes occur. Remember when the UAE ambassador to the United States said that "We favour production increases and will be encouraging Opec to consider higher production levels,” and then it turned out he hadn’t really confirmed this with his superiors, so the energy minister had to step in and reassert the Emiratis’ commitment to the OPEC+ deal.

These things happen to the best of us but when you’ve got anonymous sources, it’s really difficult to glean the truth. Of course, Reuters, the WSJ, Energy Intelligence, and the FT are all reputable sources of information. They are supposed to — and I’m sure they do — check their sources to make sure they are reliable. It’s a matter of self-respect, if you wish, unless I’m projecting.

Yet right now, every word coming out of OPEC can move oil prices up or down — and the reports about Russia’s suspension/exemption from OPEC+ and Saudi Arabia’s apparent readiness to start pumping have already done that. Every source who has something to say will get the chance to say it, whether it is an individual opinion or an actual topic of discussion.

Then, the moment OPEC+ comes out with its official statement after the end of the meeting it’s game over for all those splashy headlines. Some turned out to be correct. Others turned out to have published inaccurate information. Some traders lost money. Others made some. A lot of people are probably swearing they would never again trust the news only to keep trusting it because what’s one more bad habit?

I wrote most of this text before the OPEC+ meeting yesterday. A few years ago I would’ve been betting against myself what they will decide. Now, a lot of OPEC and OPEC+ meetings later, I know better than to make such bets.

The extended cartel agreed, in something like 10 minutes, to boost its target — note the word, it’s no longer quota, but target, as a reader of this Substack pointed out in a recent conversation — to 648,000 bpd from July to August, from 432,000 bpd previously. The exemption/suspension of Russia from the club was not even mentioned. So much for the reliability of sources.

But what did prices do after the OPEC+ news? Well, prices rose, because, apparently, traders have a longer memory than the general public and have correctly surmised that setting a target and hitting it are two very different things. After all, official production data showed that OPEC alone undershot its April production target, or maybe it was still a quota, by 2.7 million bpd. Which makes the following comment by ANZ particularly hilarious.

"The fact that Russia was left in the group suggests that production from the alliance will continue to struggle to meet even this modest increase in quota rises," the ANZ bankers said, as quoted by Reuters, because, you know, Nigeria, Angola and most of OPEC was doing so well with its targets, I mean quotas. But I’ll save my love for investment bankers for another post.

Image credit: Ken Mull