Why did Saudi Arabia call market moves mainly psychological factors?

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Saudi Arabia Attributes Oil Market Fluctuations to Psychological Factors Amidst Coronavirus Concerns

Saudi Arabia is closely observing global oil markets, with its Energy Minister, Prince Abdulaziz bin Salman, stating that current market movements are predominantly driven by psychological factors and extreme negative expectations among participants. These sentiments, he noted, are occurring despite a very limited actual impact on global oil demand. The minister drew a historical parallel to the 2003 SARS outbreak, where similar extreme pessimism did not lead to a significant reduction in oil consumption.
Monitoring Global Economic Outlook and Oil Market Fundamentals

The Kingdom of Saudi Arabia is actively monitoring global oil markets, particularly in light of "gloomy expectations" surrounding the potential economic repercussions of the coronavirus. This close watch extends to both the Chinese and broader global economies, as well as the fundamental underpinnings of the oil market itself. The focus is on understanding and assessing how these evolving expectations might translate into tangible market shifts.
Limited Impact on Actual Oil Demand

Prince Abdulaziz bin Salman emphasised that the prevailing market sentiment, which has influenced oil and other commodities, is largely a product of psychological factors. He specifically highlighted that these negative expectations are being adopted by some market participants even though the actual impact on global oil demand has been "very limited." This distinction between perceived risk and realised demand is a key element of Saudi Arabia's assessment.
Historical Precedent of SARS Outbreak

To contextualise the current situation, the Saudi Energy Minister referenced the 2003 SARS outbreak. He pointed out that during that period, extreme pessimism also gripped the markets, yet it did not ultimately result in a substantial decrease in oil demand. This historical comparison serves to underscore the view that market reactions can sometimes be disproportionate to the actual disruption to consumption patterns.
Opec+ Readiness to Respond

Beyond market observation, Saudi Arabia, alongside other members of the Organisation of the Petroleum Exporting Countries (Opec) and its allies in Opec+, has affirmed its capability and flexibility to address any potential impacts on oil market stability. The minister expressed confidence in the Chinese government and the international community's ability to contain the virus. If required, Opec+ possesses the means to implement necessary actions to support market stability, as demonstrated by their existing production cut agreement.

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Why did Saudi Arabia call market moves mainly psychological factors?

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