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Oil prices rallied yesterday, with ICE Brent settling more than 1.4% higher on the day, moving back above $65/bbl. The recent strength in the oil market has been driven by refined products, with gasoline and gasoil cracks surging amid concerns about supply. Continued Ukrainian drone attacks on Russian refineries are a concern for the market, particularly middle distillates. Meanwhile, US sanctions on Lukoil and Rosneft, and what they mean for refining assets outside of Russia, is also a concern for broader product markets. While the outlook for oil is bearish, the strength in the refined products market is proving to be a significant obstacle.

There’s still plenty of uncertainty over Russian crude oil flows due to sanctions. Ship tracking data indicate that flows have slowed in recent weeks, with the 4-week average at its lowest level since mid-September. Additionally, data show a significant decline in volumes to China and India. Yet, there’s a significant share of Russian seaborne shipments for which the destination is currently unknown, and which could ultimately end up in India and/or China.

Today, OPEC will release its monthly oil market report, offering its outlook for the remainder of this year and into 2026. The Energy Information Administration will release its latest Short-Term Energy Outlook, which includes forecasts for US oil and gas supplies. And finally, the American Petroleum Institute will publish its weekly US crude and refined product inventory numbers. They were delayed by a public holiday in the US yesterday.

By Bill Peters

One analyst says payment delays across states are likely, even after the government’s reopening

McDonald’s last week said disruptions to SNAP payments could be putting “additional pressure” on consumers.

As the U.S. government shutdown constrains SNAP food assistance for millions of low-income Americans this month, corporate executives have started to get nervous, even as some say they have yet to feel the impact.

Their remarks on recent earnings calls have come amid what has been the longest government shutdown in the nation’s history. A bill to keep the government open until Jan. 30 cleared the Senate on Monday; the House of Representatives could vote on it Wednesday, but it could still take days for services to be fully restored.

The pause on some of the SNAP benefits, along with recent cuts to the program, also arrived after more than three years in which lower-income customers have felt the impact of price increases more acutely. More executive commentary on that issue, and the shutdown’s impact on SNAP, could come next week when Walmart Inc. (WMT) reports results.

At McDonald’s Corp. (MCD), Chief Executive Chris Kempczinski said last week that the disruption in SNAP benefits added to the stress that lower-income consumers, in particular, were facing.

“If you’re not in that segment and you’re higher income, you don’t feel it as acutely – but lower income, for sure, you’re feeling it acutely,” Kempczinski said during the burger chain’s earnings call. “And I think some of what’s going on most recently with SNAP and other things might be additional pressure on that.”

Kristina Lambert, chief growth officer at poultry producer Tyson Foods Inc. (TSN), said on Monday that “we do see consumer spending patterns again changing from nonfood to more food categories.” She added that the company had a “wide range of product offerings at different budget levels.”

The government shutdown began on Oct. 1, and disruptions to SNAP payments – short for Supplemental Nutrition Assistance Program, although the benefits are still commonly referred to as food stamps – began this month, overwhelming food banks and deepening concerns about food security in the nation. A court battle has ensued over how much of that funding people can receive while the government is shut down. The agreement that advanced through the Senate on Monday would keep SNAP payments flowing through next September.

More than 40 million Americans receive SNAP benefits. Robert Moskow, an analyst at TD Cowen, said in a research note last month that SNAP accounts for 12% of spending on food and beverages. The One Big Beautiful Bill Act that President Donald Trump signed into law over the summer included cuts to that program, expanded work requirements and other restrictions.

Still, Moskow said payment delays across states were likely after the government reopened. If people who receive those benefits cut back their grocery bills by 15%, total grocery sales would fall 1.8%, he estimated.

Elsewhere on recent earnings calls, Instacart (CART) said it didn’t expect a big impact from missed or delayed SNAP payments, noting the program accounted for a small part of its business. Hershey Co. (HSY) said it hadn’t seen a big impact yet, and poultry producer Pilgrim’s Pride Corp. (PPC) said it believed the impact would be temporary.

Dole (DOLE) said it had “not seen any trends out of the shutdowns,” while food producer B&G Foods Inc. (BGS)- known for brands like Crisco, Green Giant and Ortega – said last week that it was too early to gauge the impact.

More broadly, some companies have been more cautious with their forecasts overall to account for any possible impact from the shutdown. But for others, the SNAP disruptions proved too difficult to predict.

Grocery Outlet Holding Corp. (GO) said on its earnings call last week that “any potential disruption to sales resulting from delayed or missed SNAP benefits” was not currently factored into the company’s financial outlook. Chief Financial Officer Christopher Miller noted that the percentage of the grocery chain’s sales that came from electronic benefits transfer, or EBT, payments – which are often tied to SNAP benefits – was around 9% last year.

Grocery Outlet CEO Jason Potter said that its independent store operators would be raising money for food banks. He noted that cuts to SNAP benefits in 2023 didn’t affect sales, and that payments of the benefits typically led to immediate spending.

But at Kraft Heinz Co. (KHC), CEO Carlos Abrams-Rivera said last month that consumers’ difficulties would likely extend into next year, as they continue to grapple with higher costs of living.

“With sentiment worsening, costs continuing to rise, the SNAP-related headwinds expected to intensify, we see these pressures as persisting beyond the fourth quarter, leading to a longer path to consumer recovery,” he said.

-Bill Peters

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  11-11-25 2221ET
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