Even with oil at $100, OPEC is set to rebuff calls to raise production outputs in its meeting Wednesday. What could that mean for surging commodity prices?
Addison Armstrong, director of market research for Tradition Energy, said that OPEC’s hands are tied. The cartel has lost its ability to drive prices the way it used to. If it cuts production, that sends a bullish signal to the commodities market that would drive prices higher, which in turn should be detrimental to demand. But it can’t raise production either because the second quarter is traditionally the time of lowest demand of the year.
The fact is, crude bulls are in a tough spot, Armstrong said. They’re paying for $10 upside at the most but prices could easily fall as much as $25 rather quickly as he sees it. That’s a bad risk-reward, and it’s why he would be not be a buyer of crude oil here.
And the refiners aren’t doing much better. Spring is usually their best time of the year but it looks different this time around as the crack spread between oil and gas has collapsed as of late.
The bottom line according to Armstrong? Look for bearish statistics from OPEC, not much good news for the refiners either and stay on the short side of the oil trade.
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