Is there Evidence to Support your Forecast?
Minneapolis, MN | May 16, 2023 | By: Steve Sinos, Blue Lacy Advisors, LLC
We looked at the crude oil flows OPEC could have considered before making its April announcement. First, we saw a slow-growth market with signs of risk. Prices over the two preceding quarters reflected that.
As we regularly stated during 2H 2022, crude oil prices, and more so refined product prices, were already high. Moreover, they didn’t necessarily need to keep rising, given the pace at which demand was growing and dependence on China for the upside scenario.
If we assume markets have given up the risk premium caused by Russia’s invasion of Ukraine (no further escalation), normalization of price relationships gives us better information about the current status of markets.
Now that we’ve explored the fundamentals and flows related to the possible impact of OPEC’s most recent cut, including presenting scenarios for how the market might develop in the coming months, we can better gauge the market’s reaction. It was relatively muted, almost predictable. There was an immediate spike, pushing prices higher, with the jump in oil prices exceeding refined products. However, the initial spike was short-lived. Indeed, new lows have been set since.
*This summary is based off May 8, 2023
A free excerpt, such as this one, will be published on a delay periodically. This is an excerpt from Blue Lacy Advisors, LLC's (“Blue Lacy”) weekly commentary for clients, which is based on a collection of models, research/analytical subscriptions, and bespoke work. Each week Blue Lacy explores how market drivers included in these analyses might affect or be used in clients' planning, budgeting, and execution of strategy. Call Blue Lacy to make an appointment today!
Meet the Author!
Steve has spent his career in strategy, risk, trading, and investment. He works with investors to source investments in opportunistic or high growth sectors, with particular interest in early-stage companies solving clearly defined problems.
He is currently a Managing Partner with Blue Lacy Advisors LLC, giving management teams and investors confidence in their decision making by supporting strategic planning and execution, risk management, commodity trading, and market analysis.
HedgeStar Media Contact:
Megan Roth, Marketing Manager
Laura Klingelhutz, Marketing Generalist Intern
Check out our risk management services today!