KUALA LUMPUR: Oil prices are increasingly being driven by risk and uncertainty rather than production decisions, economist and former United Nations assistant secretary-general Jomo Kwame Sundaram said.
He said recent price movements reflect geopolitical tensions more than coordinated output cuts or increases by producers.
Jomo was speaking to reporters at the Allianz Centre for Governance Speaker Series titled “The New World Order Is Not Order, Let Alone New” today.
“The question of oil prices now is not determined very much by Opec. It is determined more by wars and war tactics — not only by Iran but also by the United States,” he said.
Jomo’s remarks come as Opec (Organization of the Petroleum Exporting Countries) faces fresh questions over its influence, following the United Arab Emirates’ (UAE) decision to exit the group effective today, after nearly six decades.
Jomo said the move is unlikely to have an immediate impact on prices, but it points to shifting alignments among producers. “What is clear is that the UAE is not siding with the producers, and the unity among producers to try to cooperate on determining oil prices.”
On the longer-term outlook, he was cautious about drawing firm conclusions, noting that much depends on how current tensions evolve.
“Usually when we do any analysis, we must be aware of the current situation, what has happened previously, and what may happen in the future,” Jomo said.
Reuters reported that global oil prices jumped to a four-year high of more than US$126 (RM500.34) a barrel today on concerns that the US-Iran war could worsen and lead to a protracted Middle East supply disruption that could hurt global economic growth, but later retreated.
The market had moved higher earlier after Axios, citing unidentified sources, reported yesterday that US President Donald Trump was slated to receive a briefing later today on plans for a series of military strikes on Iran in hopes it will return to negotiations on its nuclear programme.
Global oil benchmark Brent crude futures rose as high as US$126.41 a barrel, the loftiest since March 9, 2022, but by 1327 GMT were down US$4.14, or 3.5%, to US$113.89. The prompt contract for June delivery expires today. The more active July contract was at US$108.70, down US$1.74, or 1.6%.
West Texas Intermediate crude futures were down US$2.28, or 2.1%, at US$104.60. The contract reached US$110.93 earlier, the highest since April 7.
Both benchmarks are on track for their fourth month of gains, reflecting fears that the Iran conflict could choke global oil supplies for months to come.
Trump has warned that a US naval blockade at the Strait of Hormuz could last for months.
Jomo also pointed to a longer-running shift in the global monetary system, saying moves towards de-dollarisation began well before current geopolitical tensions.
He said the trend has been visible in Asia since the 1997-1998 financial crisis, when countries began exploring alternatives and strengthening regional arrangements such as the Chiang Mai Initiative.
“For a long time, we have found, for example, in this region, since the currency crisis in 1997–1998, many people have sought alternatives. As a result, we find that more transactions between countries are no longer using the dollar as the global currency.”
Jomo said changing investor behaviour – including increased interest in gold and silver – also reflects waning confidence in the US dollar.
“When many people buy gold or silver, it reflects that they feel less secure with the dollar. They are looking for alternatives,” he said. “Taken together, developments in oil markets and currency systems point to a broader pattern of weakening global coordination.”
