Key Points
- Brent crude spot prices reached $141.36 per barrel on Thursday.
- ISM Services PMI declined to 54% in March, reflecting slowing growth.
- However, the ISM Services Prices index accelerated to 70.7%, warning of an inflation shock.
CNBC reports that Brent crude spot prices reached $141.36 per barrel on Thursday, the highest level since the 2008 financial crisis. The spot price trades at a premium of $32.33 over the June Brent crude futures contract, which closed at $109.03.
Spot prices for Brent oil require delivery in the next 10 to 30 days. The large spot premium reflects immediate supply shortages due to the closure of the Strait of Hormuz.
The futures price is “almost giving a false sense of security that things are not that stressed,” said Amrita Sen, founder of Energy Aspects.
“The financial market is almost masking the true tightness that everywhere else is showing up.”
ISM Services
The ISM Services PMI declined to 54% in March, indicating slower growth.
The Employment index contracted sharply to 45.2%. Construction and utilities are among the few industries recording employment growth, reflecting continued spending on AI data centers.
But the ISM Services Prices index accelerated to 70.7%, the highest since August 2022, during the last inflation spike.
Supply Chain
The New York Fed Supply Chain Index rose to 0.68 in March. Values above zero reflect mounting supply chain pressures, a key driver of inflation.
Conclusion
We expect continued crude shortages to drive prices even higher, increasing inflationary pressures.
If Kevin Warsh is confirmed as the new Fed Chair, he will have a hard time controlling inflation without raising interest rates.
Acknowledgments
- CNBC: Brent Crude ICE May’26 Futures
- Institute for Supply Management: ISM Report on Business
- Reuters: NY Fed says March supply chain pressures highest since start of 2023
- CNBC: Brent oil spot price for actual cargo soars to $141, highest level since 2008 financial crisis
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.