Oil prices have crossed $90 per barrel for the first time since November 2022, sending ripples through many parts of the economy. There are a variety of reasons for the upward climb, most notably the recent production cuts by Saudi Arabia and Russia, but the pace at which oil is ascending is becoming a bigger topic of discussion. After remaining below $80 per barrel for most of the year, WTI crude (CL1:COM) broke above that level in the summer – and has soared over 17% over the past three weeks – helping to raise costs on everything from transportation to manufacturing.

No peak yet: Resurgent energy prices are a particular headache for the Federal Reserve, which was recently celebrating some wins on the inflation front. In fact, U.S. consumer prices in August rose by their most in more than a year, driven by a nearly 11% increase in retail gasoline prices. A weakened Chinese economy was also thought to sap global oil demand, but supply appears to be the bigger problem, with oil and gas companies quick to point out the regulatory restrictions on their sector.

While releases from the Strategic Petroleum Reserve were commonplace in 2022, when Russia began its invasion of Ukraine, those drawdowns have brought SPR supplies to their lowest level in 40 years. If WTI crude would top $100 per barrel, the Biden administration would likely consider additional releases, but until then, there are some other options under consideration. Regular discussions are taking place with domestic producers and refiners, as well as international options like easing restrictions on exports from Iran or Venezuela.

“U.S. shale is running out of stream,” declared Investing Group author Leo Nelissen. “We’re not seeing peak oil but a significant decline in supply growth. Producers are seeing rapidly declining Tier 1 drilling reserves. They focus on free cash flow generation instead of production growth and reward investors through dividends and buybacks. They have learned their lesson – especially in an environment where new climate movements want to put big oil out of business.”


US Economy


  • Growth in consumer credit has slowed.
  • Growth in student debt continues to moderate.



  • Household net worth hit a record high last quarter, boosted by stocks and house prices.




  • Consumer spending is expected to slow in the months ahead as student loan payments kick in. However, the overall household sector balance sheet, shown as a percentage of disposable income below, is in good shape.
  • Some updates on inflation. The one-year consumer inflation expectations from the NY Fed’s latest survey edged higher last month, but the three-year index declined.



  • Morgan Stanley estimates a sharp increase in the headline CPI in August, boosted by energy prices.
  • Goldman sees the core CPI accelerating through January of next year.
  • Is the Fed’s policy rate high enough to meaningfully bring inflation down to 2%, especially given resilient economic growth?
  • Manufacturing accounts receivables entered contraction last month. This could mean any of the following:
    • Fewer sales on credit.
    • More customers paying off their debts, reducing the outstanding accounts receivable.
    • Write-offs of uncollectible accounts.



Source: Reuters   Read full article


  • More firms have been reporting declining sales.



  • Hiring is slowing.



  • The headline CPI accelerated as expected, boosted by gasoline prices.



  • The gain in core inflation was higher than expected, with the upside surprise driven by some of the more volatile components. In particular, the increase in airline fares was substantial.
  • Mortgage rates are holding above 7%.



  • August retail sales topped expectations, boosted by increased spending on gasoline
  • CEOs prepare for job cuts.



  • The PPI report surprised to the upside, boosted by energy prices.
  • On a year-over-year basis, the core PPI is approaching 2%



Market Data


  • Market breadth worsened in recent weeks as most stocks widened their underperformance vs. the S&P 500.
  • Equal-weight index:



  • The S&P 500’s lofty valuation is driven by tech mega-caps. Beyond these, valuations remain below the long-term average.



  • The depressed equity risk premium doesn’t bode well for S&P 500 performance relative to bonds.



  • The Russell 2000/Nasdaq 100 ratio hit a new low as small caps continue to underperform.



  • This chart shows the largest companies in the S&P 500 over time.



  • Who owns Treasuries outside the US?



  • VIX hit the lowest level since 2019.



Great Quotes


When I was a kid my parents moved a lot, but I always found them. – Rodney Dangerfield


Picture of the Week


Here is a look at S&P 500 companies with the highest debt ratings.




All content is the opinion of Brian Decker