Opec isn’t scaring anyone

Opec isn’t scaring anyone

Good morning. Here at Unhedged our main project for the rest of this week is ignoring the indictment of a second-tier real estate developer from Florida. But that should leave us with a few other things to write about. Email us your ideas: [email protected] and [email protected].

Opec flexes, markets unimpressed

Oil rose more than 6 per cent, to $85, yesterday. This was in response Opec’s announcement, over the weekend, that Saudi Arabia would cut its production by 5 per cent, and that members of the Opec+ cartel would follow with cuts of their own. The move was rich with political implications. Many analysts argue it marks a strategic change by the Saudis and their allies, rather than a tactical move to defend a weak oil price. From the FT:

This sounds like serious stuff to us. So we were struck by how little markets responded on Monday. Stocks leveraged to oil, from upstream production to oilfield services, popped. But given that sustained higher oil prices are stagflationary, we were a bit surprised to see gains across a variety of other sectors (healthcare, materials, staples). More surprising still, the policy-sensitive two-year bond yield fell nine basis points.

This is particularly notable given that Opec+ has