Earlier this month, rumor of an oil pipeline blast in Saudi Arabia surfaced and sent investors into a frenzy, underscoring just how much power new media has in driving up prices—especially in an already finicky and nervous oil market.
Originating on Facebook and Twitter, the story was quickly picked up by the state-owned Iranian press, sending investors scrambling and causing oil to soar in after-hours trading. Saudi officials were quick to dispel the rumor and quell concerns of a supply disruption, bringing crude prices back down the next day.
Geopolitics is a constant factor in the oil market and recent tensions between Saudi Arabia and Iran, illuminated under the lens of social media, have made the oil markets that much more volatile.
A Saudi official told the Financial Times that the report was a deliberate hoax and that “certain parties” were upset with Saudi Arabia’s role in the current situation, stopping short of pointing the finger at Iran.
In a recent Bloomberg article on U.S. energy options, Street One Financial President Scott Freeze (a DPR client) commented, “Most of the run-up in oil prices has been due to Iran and geopolitics.” Last week’s incident is just another sign that oil markets are more sensitive than ever to regional issues. Prices shot up without any corroboration from the usual cadre of financial media outlets.
Perhaps that’s due to the fact that it was Saudi Arabia in the headlines; while Iran’s production of 3.5 million barrels per days (bpd) is no small number, Saudi Arabia’s 10 million bpd far outpaces it. It’s well known that the Saudis are a key factor in the global standoff with Iran—their daily oil production can make or break the efficacy of sanctions on Iranian oil.
With new media’s increasingly prominent role in global communications, oil prices may be on a constant roller coaster for some time. And as the international standoff intensifies, both new and traditional media coverage will continue to influence the oil market—and each other.
– Hod Klein