Daily SITREP: JPMorgan: Oil Will Spike to $150 per Barrel (Mon, 25 September 23) – Forward Observer

Daily SITREP: JPMorgan: Oil Will Spike to $150 per Barrel (Mon, 25 September 23)


Good morning. Here’s your Daily SITREP for Monday, 25 September 2023.


  • READ TIME: 6 Minutes, 25 Seconds
  • Inside the Beltway
    • (1) McCarthy Ukraine Money Reversal Increases Shutdown Chance
    • (2) Scandal-Plagued NJ Senator Indicted for Egypt Bribery Scheme
    • (3) Dem Rep. to Throw His Hat in the 2024 Ring Against Biden
  • Domestic INTSUM
    • (4) JPMorgan: Oil Will Spike to $150 per Barrel
    • (5) October’s Four Economic Horsemen
    • (6) Biden Announces “Social Cost of Carbon” Government-Wide Rule
  • Global SITREP
    • (7) Grantham: Global Home Prices Will Fall 30%
    • (8) Taiwan Defense Ministry Concerned with Chinese Troop Movements in Fujian
    • (9) France Pulls Troops from Niger, Evacuation of Citizens Ongoing
    • (10) U.S. Army Hospital Quietly Treating American Volunteers


  • (1) MCCARTHY UKRAINE MONEY REVERSAL INCREASES SHUTDOWN CHANCE: House Speaker Kevin McCarthy (R-CA) will now include $300 million in Ukraine funding in the defense appropriations bill, a reversal from his previous announcement that the House would vote on Ukraine funding in a separate bill.
    • Freedom Caucus Rep. Matt Rosendale (R-MT) said, “life is going to go on” when reporters asked if he was concerned about the possible shutdown on 01 October.
    • Why It Matters: House Freedom Caucus members who tanked defense spending and Continuing Resolution votes last week and brought the House to a halt have said Ukraine funding is a no-go for them. McCarthy backtracking on including Ukraine money in appropriations bills, hoping he can get the votes to strip them out on the floor, increases the chances of a shutdown on 01 October. Democrats have said they will not cross the aisle to save McCarthy from a shutdown but will likely vote to keep Ukraine funds in the appropriations bills. – R.C.
  • (2) SCANDAL-PLAGUED NJ SENATOR INDICTED FOR EGYPT BRIBERY SCHEME: Senator Bob Menendez (D-NJ) stepped down as Senate Foreign Relations chair after Federal prosecutors released an indictment with allegations that Menendez and his wife took hundreds of thousands of dollars in bribes and provided sensitive government information to secretly aid the Egyptian government.
    • Menendez said the “excesses of these prosecutors is apparent,” and the prosecutors are misrepresenting normal constituent services of a Congressional office.
    • Why It Matters: Menendez previously defeated serious corruption allegations in 2018, after which this investigation appears to have begun. Previously, an indictment was handed down with plenty of time for Menendez to defeat it before he was up for reelection. Still, Menendez will be running for reelection and, after the indictment, is now facing a primary challenger and calls from fellow Democrats to resign. The timing seems convenient for the White House when almost half of voters think President Biden acted criminally in business deals with his son Hunter, and both the prosecution of Hunter and the impeachment inquiry of Biden are set to begin this week. Expect the Department of Justice (DOJ) and Democrats to lean on Menendez to fight the perception that the DOJ has become politicized. – R.C.
  • (3) DEM REP. TO THROW HIS HAT IN THE 2024 RING AGAINST BIDEN: Rep. Dean Phillips (D-MN) said he is now considering entering the 2024 Democratic primary because he is concerned that “there is no alternative” and something could happen between now and the election that would “make the Democratic Convention in Chicago an unmitigated disaster.”
    • Phillips began talking to donors about a primary campaign in July but backed off during subsequent media appearances.
    • Why It Matters: Democrat lawmakers have publicly been lock-step behind President Biden’s reelection for more than a year now, and Phillips is the first mainstream Democrat to break ranks. This could be an early sign that Democrats are losing confidence in Biden’s chances at reelection. – R.C. 


  • (4) JPMORGAN: OIL WILL SPIKE TO $150 PER BARREL: JPMorgan analysts said an oil supply shortfall could push prices to $150 per barrel “over the near to medium term.”
    • “We are turning bullish once again on the global energy complex,” JPMorgan’s research report said. “Our analysis reveals that the oil S&D [supply and demand] gap can only be met by Saudi spare capacity.”
    • JPMorgan forecasts a 1 million barrel per day supply shortage in 2025, and this gap will widen to 7 million barrels per day in 2030, which would mean even higher oil prices.
    • Why It Matters: Government climate change and Environmental, Social, and Governance (ESG) policies have restricted energy companies’ oil production, leading to higher prices. An oil shortage should keep prices elevated despite a slowing global economy. – H.B.
  • (5) OCTOBER’S FOUR ECONOMIC HORSEMEN: Higher oil prices, a broader auto workers strike, the resumption of student loan payments, and a lengthy government shutdown could combine for a chaotic October in the economy and financial markets, according to the Wall Street Journal.
    • “It’s a quadruple threat of all elements that could disrupt economic activity,” said Gregory Daco, Chief Economist at EY-Parthenon.
    • U.S. Gross Domestic Product (GDP) will fall by 0.05-0.1% each week of a government shutdown, according to investment bank estimates, and about $100 billion in student loan payments over the next year will mean tens of billions less in consumer or investment spending.
    • Why It Matters: The U.S. economy will face a tough test of its strength starting next week. Higher interest rates in the fourth quarter may be the fifth element that could accelerate an economic decline and more volatility in financial markets. – H.B.
  • (6) BIDEN ANNOUNCES “SOCIAL COST OF CARBON” GOVERNMENT-WIDE RULE: The White House announced a new plan to expand consideration of climate costs in agency policies and decisions, and eventually government procurement.
    • The White House said the federal government “has the ability to move markets,” and the Federal Acquisition Regulatory (FAR) Council is drafting a rule for how all federal agencies will “build the social cost of greenhouse gas emissions” into all future procurement decisions.
    • Why It Matters: The Biden administration is now formalizing the strategy used by both the Biden and Obama White Houses of forcing the adoption of “green energy” by either eliminating or hindering the adoption of fossil fuel alternatives. – R.C.


  • (7) GRANTHAM: GLOBAL HOME PRICES WILL FALL 30%: Billionaire investor Jeremy Grantham said higher interest rates would pop the global real estate bubble, collapsing home prices by 30%.
    • “It [residential real estate] used to be multiples of three and a half times family income. London is now ten times. Toronto is worse. No one can afford to buy a house… This is not a stable equilibrium,” Grantham said.  
    • Grantham expects higher mortgage rates will not immediately collapse the housing market, “but you can be absolutely certain that it [sic] will.”  
    • Why It Matters: A 30% fall in residential real estate prices in London, Toronto, and other cities could spark another global financial crisis. U.S. residential real estate markets – especially in Texas, Florida, and other growing states – likely won’t face such a steep collapse due to a tight housing supply and strong demand. According to Morgan Stanley analysts, America’s biggest real estate risk is the commercial sector, which could decline by 40%. – H.B.
  • (8) TAIWAN DEFENSE MINISTRY CONCERNED WITH CHINESE TROOP MOVEMENTS IN FUJIAN: Taiwan’s defense ministry is reportedly watching troop movements in Fujian across the straits from Taiwan.
    • Taipei said 20 PLA aircraft were operating around Taiwan conducting unusual maneuvers on Thursday, and China’s Strategic Rocket Forces were mobilizing near Dacheng Bay in Fujian.
    • Taiwan’s Central News Agency said Chinese ground troops may be massing in Fujian, a suspected embarkation point for PLA amphibious forces.
    • Why It Matters: The announcement by Taipei indicates their concern over potential preparations for military action against Taiwan. Taipei is likely attempting to focus international attention on Chinese activity to deter possible PLA plans for coercive measures against the island nation. The prime weather period for cross-straits military operations begins in October and lasts through December. – M.M.
  • (9) FRANCE PULLS TROOPS FROM NIGER, EVACUATION OF CITIZENS ONGOING: France is conducting an immediate evacuation of diplomats and civilians from Niger following an abrupt reversal by the French government.
    • France will pull its military out of Niger by the end of the year, according to a statement by President Emmanuel Macron on Sunday.
    • France’s ambassador and embassy personnel were being evacuated as of Sunday.
    • Why It Matters: The decision to withdraw from Niger comes a day after massive columns of Tuareg rebels and allied Islamic groups began a movement towards the capital of Niamey. An alliance of rebel forces from the Sahel region declared war on the new military junta in Niamey and their Russian Wagner Group advisors. France is likely attempting to remove its personnel from a volatile situation over which it has little control. The increasing Russian influence in Niger has been a cause for Western concern in West Africa. Still, the emergence of an Islamic Sahel alliance could signal an extended period of unrest in the region. – M.M.
  • (10) U.S. ARMY HOSPITAL QUIETLY TREATING AMERICAN VOLUNTEERS: The U.S. Army’s Landstuhl Regional Medical Center in Germany has been quietly treating Ukrainian Armed Forces personnel, including American volunteers and other Westerners injured in combat in Ukraine.
    • A Department of Defense (DOD) official said leaders at the DOD were unaware that Landstuhl was regularly treating American volunteers, but they were not concerned.
    • Why It Matters: It would have been less provocative to funnel money through an NGO to a private American or foreign hospital to provide this care. A U.S. Army hospital providing care to American and Western citizens fighting in Ukraine sends a not-very-subtle message to Russia that the U.S. government is an active combatant in the war. It is highly unlikely that DoD officials were unaware of the situation, and the decision to allow it leaves the impression of laziness from officials who could have exercised more caution towards plausible deniability. – M.M.


M.S. indicates analyst commentary from Mike Shelby

M.M. indicates analyst commentary from Max Morton

J.V.  indicates analyst commentary from Jared Vaughn

R.C. indicates analyst commentary from Robert Cook

H.B. indicates analyst commentary from Harrison Burge

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