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Saudi Power Over Oil Prices Is Limited

Are you getting bored of the oil market yet? Traders are. Brent crude achieved just a $3.12 range in the ten trading days ended March 12th, representing its most narrow band since May of last year. While headlines have screamed about the impending bearish doom or bullish boom they happen to see ahead, the real story has been that oil markets have substantial buffers on both sides of the range. Option traders see the trend persisting in the near term with the straddle expiring April 25th worth just $5.00.

This week’s key headlines have fit neatly with the sideways trend. On the supportive side, Monday’s Saudi announcement of larger than expected exports cuts in April (which are still focused on the US) gave the market a bullish jolt. On the resistance side, the most recent IEA forecast predicting an additional 4m bpd of US supply growth over the next five years points to the limits of OPEC’s ability to manage the market higher. We continue to adhere to the idea that OPEC+ can absolutely manage downside risk in the market but they’ll have trouble creating genuine upside risk. For fun, we’ll even define this numerically offering that OPEC+ can keep prices above $50, but they can’t push prices over $75 without a parallel bullish narrative.

So where will oil’s next big move come from? For upside, we’re still believers in the idea that OPEC production cuts, dovish central bankers and a US/China trade deal will serve as…




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