OPEC’s shock resolution earlier this month to lower manufacturing by 1.2 million barrels a day was seen as a bullish signal for the oil market. However one analyst says it’s a “purple flag” for oil shares, as a result of OPEC is reacting to weak demand that will take some time to rebound.
JP Morgan analyst Christyan Malek wrote in a notice on Friday that oil shares have tended to put up tepid returns at greatest after OPEC manufacturing cuts—regardless that these cuts are supposed to enhance oil costs. “On stability, we notice that power equities typically battle to outperform the broader market and at greatest trades broadly flat within the context of OPEC cuts geared toward managing provide within the face of deteriorating financial fundamentals,” Malek wrote.
