Morning Reads


Todays Open Interest Change




Crude is back in the news following a shock oil output cut from major producers in the OPEC+ group. WTI crude futures (CL1:COM) surged past $81 a barrel at the open to its highest price since late January, with the May contract rallying as much as 8%, while June Brent crude (CO1:COM) opened at its best level in nearly a month, advancing by the same percentage to over $86/bbl. The decision comes as the U.S. is still entangled in an environment of high inflation, and has the potential to upend economic policies, as well as monetary decision-making like upcoming Fed rate hikes.

Bigger picture: The output reduction will be led by OPEC kingpin Saudi Arabia, with total production cuts totaling nearly 1.2M bbl/day - that will start in May and last until the end of 2023. Russia's recent production cuts of 500K barrels per day were also extended, and add to the 2M bpd that were taken offline by OPEC+ in October. Together, the rounds of cuts mean that about 3% of the world's oil has been removed from the market in the past half a year, helping sustain prices following U.S. actions against Russian crude like sanctions and a price cap.

Goldman Sachs changed its oil production and price forecasts on the latest announcement, which comes before the busy summer travel season. "Winners from the OPEC+ cuts include Saudi Arabia, Warren Buffett and EV manufacturers, while losers include airlines and hopes for an economic soft landing," Logan Kane writes in a new analysis published on Seeking Alpha. It also comes amid an "ongoing chess match between the Biden administration and the Kingdom of Saudi Arabia," with reports suggesting that Washington angered Riyadh by declining to refill the Strategic Petroleum Reserve when crude oil prices were low, so the Kingdom "decided to get some payback." See Saudis say depleting oil reserves could 'become painful in the months to come'

Go deeper: Following some rushed diplomacy ahead of his trip to the Middle East last summer, President Biden finally met with Saudi Crown Prince Mohammed bin Salman after previously pledging to make a "pariah" out of the Kingdom over the killing of U.S.-based columnist Jamal Khashoggi. There was an apparent understanding that the summit and a notable fist bump would lead to additional Saudi crude production, but things continue to be going the opposite way despite reported assurances. Riyadh first scrapped a paltry bump to OPEC+ production of 100K bpd on Sept. 5, while a month later deepened its cuts by a whopping 2M barrels per day, and will now take another 1.2M barrels offline. The Saudis have painted the move as a "precautionary measure aimed at supporting the stability of the oil market," while the U.S. doesn't think cuts are "advisable at this moment given market uncertainty - and we've made that clear." Check out Saudi Aramco racks up record $161B profit for 2022 (225 comments)

Survey Monday

The Kingdom of Saudi Arabia is a "key energy, economic, and security partner," according to the U.S. Energy Department, but the relationship hasn't looked more strained in decades. While foreign policy and energy policy are often intertwined, the Saudis have recently taken steps to join the Shanghai Cooperation Organization, invested billions of dollars in Chinese petrochemicals, and even turned to Beijing to broker a normalization deal with Iran. The feud with the U.S. threatens to shake up the oil market, but will it change your investment allocation to the energy sector in 2023?

· Increase holdings (time to scoop up more energy stocks)
· Keep holdings (already in the portfolio - that's enough)
· Trim holdings (too much chatter, the trade is so 2022)
· Cut holdings (economic downturn is the real news here)

Take the survey and see the results here

Octagon meets the ring

World Wrestling Entertainment (WWE) is reportedly closing in on a deal to be sold to talent-agency company Endeavor Group Holdings (EDR), already the parent of mixed martial arts league Ultimate Fighting Championship. The sale could be announced as soon as today and would result in a new publicly traded company focused on combat sports and entertainment. The proposed transaction would reportedly assign WWE an enterprise value of $9.3B and would mean the end of Vince McMahon's control of WWE after several decades. Recent weeks have brought increasing sale speculation and CEO Nick Khan said last week the company had seen "robust" interest. (10 comments)


Analysts are still arguing over whether Tesla (TSLA) beat or missed delivery expectations for Q1, but the EV maker delivered a record 422,875 vehicles (here's a quarterly tally by model). "We continued to transition towards a more even regional mix of vehicle builds, including Model S/X vehicles in transit to EMEA and APAC," noted the company on the production strategy. While Tesla has been charging forward with EVs, Wood Mackenzie says its Solar Roof technology has fallen far short of installation targets, and the latest developments are sure to add more fuel to the constant Tesla debate. Read why Seeking Alpha contributor Robert Honeywill is bullish and why Anna Sokolidou is bearish on the stock. (316 comments)

More layoffs?

McDonald's (MCD) has reportedly told corporate employees that its U.S. offices will remain closed early this week so the company can announce layoffs as part of a broad restructuring. The fast-food chain beat analyst estimates for Q4 earnings and revenues in January, but spooked the market after management warned that higher input costs meant 2023 operating margins could fall below what were then analysts' consensus estimates. At the time, McDonald's also said it would review corporate staffing levels as part of its business strategy. Is the company recession-proof? SA contributor Ironside Research sizes up Mickey D's current valuation and operating performance. (34 comments)

Today's Markets

In Asia, Japan +0.5%. Hong Kong +0.1%. China +0.7%. India +0.2%.
In Europe, at midday, London +0.7%. Paris +0.5%. Frankfurt +0.1%.
Futures at 6:30, Dow +0.3%. S&P -0.1%. Nasdaq -0.6%. Crude +5.4% to $79.78. Gold -0.2% to $1982.50. Bitcoin -0.2% to $28,337.
Ten-year Treasury Yield +3 bps to 3.52%

Today's Economic Calendar

9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
12:30 PM Investor Movement Index

Companies reporting earnings today »

What else is happening...

Goldman Sachs leans to growth picks in either recession scenario.

Twitter pulls check mark from main New York Times (NYTaccount.

Medicaid insurers underperform as COVID protections lapse for millions.

Lions Gate (LGF.A) files draft registration for Starz spinoff.

First Republic (FRC) is the latest example of corporate confusion.

Bank tumult likely to result in tighter credit - NY Fed's Williams.

Paramount (PARA) makes splash, breaks into streaming ratings with 1923.

Economic data from China: Factory growth shifts into neutral.

Macau casino gaming revenue hits a post-pandemic high.

Seagen (SGEN)-Pfizer (PFE) deal spread becoming increasingly attractive.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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