OPEC Cuts Crude Jumps
The big news out today, was the fact that 9 members of OPEC announced a surprise cut totaling 1.66mn b/d which will take effect from May till the end of 2023.
Here are the reductions per country per Zerohedge:
*SAUDI ARABIA TO CUT OIL OUTPUT BY 500,000 BARRELS/DAY FROM MAY
*KUWAIT TO VOLUNTARY CUT OIL PRODUCTION BY 128,000 BARRELS/DAY
*UAE TO REDUCE OIL PRODUCTION BY 144,000 BARRELS/DAY FROM MAY
*KAZAKHSTAN TO CONTRIBUTE 78K B/D TO OPEC+ OUTPUT CUT: MINISTRY
*IRAQ TO CUT 211,000 B/D OF OIL OUTPUT FROM MAY: MINISTRY
*ALGERIA TO CUT 48K B/D OF OIL OUTPUT FROM MAY TO END 2023: APS
*OMAN TO CONTRIBUTE 40K B/D TO OPEC+ PRODUCTION CUT: DELEGATE
Given the increasing likely outcome for a future recession, this does not surprise us one bit. OPEC is being proactive and reacting to what it knows is a very uncertain future. So why not protect profits while you still can. Geopolitically this is a disastrous blow to an already dismal administration who continues to make policy after policy error. We know the global leaders do not respect the current administration and the American people will ultimately pay the price at the pump as they always do.
This should accelerate the coming recession as cash strapped consumers who tapped credit for over a Trillion dollars in the last year, and who no longer have their houses as an ATM to refinance, will find it very difficult to continue their status quo.
As far as oil, the May contract has pushed past the current down channel in what seems to be a breakout for now, but we will not buy into this theme unless we close above our down channel, which would require a close above $80 this week on our daily chart:
$78 and gap open at $75 are key supports and will most likely see heavy fundamental support on a dip back there. Upside targets will be $87 first as key resistance then $94 above which offers a great location for longer term recession believers!
Equities are down slightly with the Nasdaq seeing the most weakness down about 80 points, but will see what NY session has to say! April seasonals are favorable for equities and given last year’s performance during this time, we believe the fundamentals may provide ample evidence of further upside given the only thing needed is for the FRB to expand their balance sheets.
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