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The Bearish Risk Of Bullish News

Oil market bulls have had an easy two and a half months to start the year as prices have trended steadily higher. Working in concert, OPEC+ production cuts, central bank easing and progress on a US/China trade deal have basically eliminated downside risk and added a healthy amount of upside risk. We’ve been largely optimistic on all three themes and continue to believe they will positively impact prices through the balance of 2019. In short, we see continued OPEC+ cuts near current levels, continued dovish signaling from the US Fed and a US/China trade deal that Mr. Trump can use to get momentum in the 2020 elections.

Unfortunately, we also keep getting this nagging feeling these positive themes have been priced in to the market and 2019 could be the ultimate year of ‘buy the rumor, sell the news’ even if substantially bullish macroeconomic, geopolitical and fundamental upside headlines come to fruition. While we aren’t turning bearish on oil, we continue to believe that the easy money has already been made from the long side and observed tepid reactions to positive news on all three key fronts this week which make us think that there will need to be significant bullish surprises in order to push oil prices north of the $75 mark.

Perhaps the best example we’ve seen of this in the last few trading sessions has been the reaction to OPEC+ production data. OPEC+ production data for February revealed increased will from the Saudis to tighten…




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