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Near-Term Risks Pinned on Technical Factors put Timing of Long-Term Bullish Expectations in Question

Minneapolis, MN | April 3, 2023 | By: Steve Sinos, Blue Lacy Advisors, LLC

Three things

  1. Market cycles are shorter than fundamental cycles. So, at this point, bullish traders are guessing about when the bull run will start and how to position themselves to take advantage.

  2. In the meantime, another week of liquidation in a market driven by technical factors. It is unclear how long this trend can run, but it will likely lead to high volatility.

  3. Products, especially jet fuel, are getting attention now. Jet fuel demand growth, especially in China, is expected to account for much of the expected oil demand growth in 2023.

Crude Oil

I shared the following sentiment during a variety of meetings and conversations with clients this week:

You can’t “remain bullish” an asset whose value has fallen >40%; you are “bullish again.”

That’s where we are with oil prices. More importantly for risk management, I hope it emphasizes the difference between a fundamental forecast and the practical execution of strategy. The risk cycle is shorter than the fundamental cycle, so you should be prepared for market volatility. Especially in market environments like this one, with heightened volatility driven by technical factors and risk adjustments, which points to more volatility. That means considering your budget timing - what does annualized volatility in the 45 range mean for your budget? What are the downside scenarios (which could mean higher or lower prices, depending on whether you are a producer or a consumer) that you are willing to accept? Beyond those, what are the costs you are willing to pay to minimize risk?

*This summary is based off March 26, 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!

Phone: +1-832-413-3124

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.

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