Mind your language

There has been an outbreak of unity within Opec, just when it needed it the most.

With the parameters of the deal set out, a waiting game has begun. Will there be the large seasonal rise in consumption this quarter necessary for inventory rebalancing? Member states appear to think so, and everyone that matters has signed on for Saudi oil minister Khalid al-Falih’s mantra of ‘whatever it takes.’

Whether deliberate or not, this line echoes a speech given by European Central Bank president Mario Draghi in 2012.

If Opec wants to adopt a central bank role, it needs to think about language. Central bank chiefs use words like “process” and “adjustment”, often couched in language so technical it can scare only those who fully understand whether the leverage ratio should reflect Pillar 2, or if market liquidity risk affects euro corporate bonds more seriously in stress periods.

They tend not to use words that can alarm. Words like “emergency”. This word is, in the context of the oil market, often attached to “meeting” to form a phrase that can easily be taken out of context.

So, to take a hypothetical example: an oil minister is asked, on leaving a meeting, or a restaurant, or his home, whether Opec and non-Opec countries are considering holding an emergency meeting. This question will be asked in good faith by a reporter, in reaction to, say a fall in the crude price that could strain any agreements on output that may be in place.

The minister should not, under any circumstance, use the phrase “emergency meeting” back to the reporter as part of his hypothetical answer. Even if it is included in the phrase “there is no need for an emergency meeting, how many times do I have to say this before you believe me?”

That’s because only two words in that phrase will be seized upon. Can you guess which? They are the words that will activate algorithms, and they are the words that will fly around the world in pithy bites of 140-characters.

More suited to the central banker role was former Saudi honcho Ali al-Naimi. Indeed, transforming Opec from the political bear pit it used to be into something more like a central bank was his ambition. For years, Naimi said little, and when he did speak he seldom strayed from a fairly tight set text. Prices were generally good for producers and consumers (even when they were at a level where the latter would take issue), and Opec members were usually in agreement (even when they obviously were not), and any price uncertainty was the fault of speculative investment money (even when that was patently untrue).

Many people knew Naimi was often being economical with the actualité.  But that was the word, and the word was good.

Maybe there was a memo, but Opec ministers have recently tempered their language. The ministers of Iran, Iraq, the UAE and Qatar have all pledged allegiance to the stated aims, in language designed to reassure. This is a rare show of unity in the Middle East. So, significantly, has Russian oil minister Alexander Novak, the only non-Opec partner to cuts who really matters.

Back in November, Barclays’ research analysts said Opec would benefit from keeping a low profile.  Finally, it seems Opec agrees. The deal’s monitoring committee is on side, and al-Falih has all his important allies singing the same song. The wait begins.

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