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You Don’t Have to Understand Why OPEC Cuts - You Can Have a Plan for How to Respond

Minneapolis, MN | April 24, 2023 | By: Steve Sinos, Blue Lacy Advisors, LLC

Three Things

  1. Markets were likely looser than OPEC wanted through February, even after signaling a desire for lower production with its November cuts, leading to further discussion of cutting production targets.

  2. Contrary to shocks like banking failures, we can observe the actual changes/trends in flows in the coming months and respond based on the evidence, disregarding OPEC’s motivations.

  3. There were signs of a firmer market leading up to the announcement. Assuming the participating members follow through, the second half of 2023 could be tighter than the market we’ve seen since the first cut.

Leading Up to April’s Announcement

When the news broke, public analysts and commentators rushed to analyze the motivation. They also followed with the expected “Is this bullish or bearish?” debate. It’s very challenging to use OPEC announcements as forecasting variables. Each comes in a unique environment. Consider the difference between this last announcement and the cut announced in February 1992. Similar timing, and both followed announcements that came in the previous November. That’s about all the two announcements have in common. Thankfully, our task is to devise a plan for what comes next. While we should be aware of this history, we can focus most of our attention on the immediate past and look for clues about how the market will trend in the upcoming months.

*This summary is based off April 16, 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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