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Why You Should ‘Sell’ The OPEC Meeting This Time Around

There are very few reliable patterns in any market, let alone the volatile oil markets. There is, however, one thing that seems to happen more often than not. Over the last few years, since the OPEC+ production cuts have been in place, prices tend to climb in the days leading up to a scheduled meeting of either a formal or informal meeting of OPEC. With a meeting scheduled for next week, that may well be the case to some extent again, but this time, rather than trade the expected strength going in, the risk/reward calculation favors selling into any such move.

That upward pressure on pricing as a meeting approaches makes sense. Participants are frequently asked for comments before the meeting begins and, given that OPEC is trying to push prices up at the moment, it should come as no surprise that those comments are usually positive. There is always lots of talk of further cuts and better enforcement in the run-up to a meeting, regardless of the real chances of any agreement to that effect. After all, why wouldn’t they all talk their book?

The above chart for the main WTI futures contract (CL) gives the first clue as to why trading in expectation of that may not work this time around. As you can see, while there is some boost to prices in the run-up to a meeting (marked on the chart by a blue arrow) that move quickly reverses once the meeting is done. That makes timing a long position tricky. Leave it too late to enter and the potential profit is extremely…




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