Oil Rises After OPEC+ Production Increase Seen Less Than Feared — Market Talk

By Mike Murphy

Prices for U.S. benchmark West Texas Intermediate crude slumped last week on oversupply fears.

OPEC+ on Sunday agreed to increase crude production in November by another 137,000 barrels a day, despite rising concerns of a global glut.

The group of major oil-producing countries has been announcing monthly production increases since April, boosting output by a total of about 2.5 million barrels a day through September.

Read more: Why OPEC+ will likely hike next month's oil-output quota - even as prices just posted their biggest weekly drop since June

Before the meeting, Russia and Saudi Arabia had opposing views, according to reports by Reuters and Bloomberg News. According to those reports, Russia had sought a modest output boost, while Saudi Arabia sought a much larger increase - up to quadrupling production. The Saudis apparently backed down, as the more modest hike agreed upon was the same as October's hike.

U.S. benchmark West Texas Intermediate crude for November delivery (CLX25) (CL.1) rose Friday, but ended the week down 7.4% for its worst week since June, amid expectations for a global surplus of crude over the next year or so. The global benchmark, December Brent (BRNZ25) (BRN00), declined slightly Friday but posted a weekly loss of 6.8%.

Forecasts from the International Energy Agency show that global oil supplies are poised to outpace global demand in 2025 and 2026.

OPEC+'s production hikes have been a tool to both punish some countries that were overproducing oil and to bring down prices in an effort to regain market share from U.S. shale drillers.

OPEC+ cited "steady global economic outlook and current healthy market fundamentals" in again raising their output, according to Sunday's statement.

Still, the moves by OPEC+ sound "more like market theater than supply policy," Stephen Innes, managing partner at SPI Asset Management, said in a note Sunday. Innes noted that while monthly production quotas have increased, actual production has lagged those numbers, as OPEC+ is still "unwilling to flood the market and crater prices."

Traders "still have to price the illusion," Innes said, "and prices whip around in a tug-of-war between expectation and evidence."

OPEC+ will next meet Nov. 2.

Myra P. Saefong contributed to this report.

-Mike Murphy

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

By Rebecca Feng

The Organization of the Petroleum Exporting Countries and its allies agreed on a restrained oil output increase on par with earlier moves, a bet that the group can eke out more revenue without causing a crash in prices.

Eight OPEC+ members led by Saudi Arabia said they would boost production by 137,000 barrels a day in November, the same as the output increase in October, the group said after an online meeting Sunday.

The cartel wants to regain market share lost to U.S. shale producers, Brazil and Guyana, and to rein in other OPEC members that routinely exceed production quotas. Lower oil prices also would please President Trump, who repeatedly has called for lower gas prices at the pump.

The move builds on earlier decisions by the Vienna-based cartel to unwind a layer of production quota curbs totaling roughly 1.65 million barrels a day, which was first implemented in 2023. An earlier layer of production curbs, totaling 2.2 million barrels a day, already had been fully rolled back in September, a year ahead of schedule.

Brent crude futures dropped $4.90 last week as traders positioned for a larger-than-expected production increase.

By going with a more restrained increase of 137,000 barrels, the cartel "stepped carefully after witnessing how nervous the market had become," about the possibility of even larger production increases, said Jorge León, head of geopolitical analysis at Rystad Energy, who formerly worked for the cartel. "The real test will come when fundamentals and politics shift again."

Brent crude and West Texas Intermediate have both retreated by more than 13% this year thanks to the cartel's production increase and concerns over a looming global oil supply glut.

Oil prices have traded within a range between $65 and $70 in the past three months , indicating relative balance between supply and demand for the world's most important energy source.

Strategists say that multiple factors formed a price floor for oil prices. Among them are strong summer demand, aggressive Chinese stock building, and the continuing conflicts in the Middle East and between Russia and Ukraine.

Analysts from JPMorgan expect a surplus of around 2 million barrels a day for the remainder of this year and into next year. The International Energy Agency forecasts that oil supply growth will be 2.7 million barrels a day this year and 2.1 million the next, lifting an earlier estimate.

OPEC, which produces up to 40% of the world's oil, started curtailing production in 2023, in a bid to stabilize prices when economic growth was slowing. The decision at the time drew criticism from the U.S., which accused the group of indirectly supporting Russia's invasion of Ukraine by keeping oil prices high.

The cartel shifted course in April and started rolling back previous voluntary cuts.

The eight producers behind the voluntary cuts — Saudi Arabia, Russia, Iraq, U.A.E., Kuwait, Kazakhstan, Algeria, and Oman — will next meet on Nov. 2.

Write to Rebecca Feng at rebecca.feng@wsj.com

By David Wainer

As American shoppers buy less packaged foods, Big Food has leaned on a familiar excuse: It's the economy, stupid . True, inflation has forced some families to trade down to cheaper store brands, and stagnant wages have squeezed household budgets.

That explanation misses a crucial shift: middle- and high-income Americans are still splurging, just not on legacy labels. Their dollars are flowing to niche names with more cultural cachet, from fancy new protein bars to chewier candy.

So-called insurgent brands now capture a wildly disproportionate share of growth. Though they make up less than 2% of food, beverage and household products, they drove nearly 39% of incremental category gains in 2024 — more than double their share the year before, Bain & Co. research shows.

That leaves household names such as General Mills and Kraft Heinz squeezed from both sides: They are losing budget-conscious shoppers to private labels on price, and more-affluent ones to challengers on quality. Total food sales returned to growth in 2024, yet large-cap food makers' volumes are still falling, notes Max Gumport of BNP Paribas.

Consider the meteoric rise of Chomps, the jerky maker. The meat-snacks category, with $7.7 billion in annual sales, is one of the fastest-growing in food, expanding about 14% over the past year, according to Numerator, a consumer-data company. Nearly all that expansion is going to such upstarts as Chomps, which has scaled from $70 million in 2021 sales to roughly $660 million. It has grown much faster than traditional rivals including Slim Jim of Conagra Brands and the longtime leader, Jack Link's.

Chomps has redefined a product once seen as a nostalgic macho niche. Its sugar-free, high-protein sticks are pitched as healthy, portable snacks for health-conscious buyers that skew female and who once avoided that aisle, says Matt Landen, the company's senior vice president of business development. The same story is playing out across chips, frozen foods, chocolate and yogurt. Upstarts are grabbing share through nimble marketing, rapid product rollouts and the focus of having fewer things to sell.

This partly echoes the state of the food industry before the pandemic, when big brands were scrambling to keep up with shifting consumer tastes and new health trends, such as the rise of low-carb and plant-based diets. Upstart brands gained share then, and many incumbents turned to acquisitions to keep their product portfolios fresh.

Now more than ever, disruption is being accelerated by technological progress and eroding barriers to entry. Online retailers such as Amazon give small brands distribution without costly shelf space. Social media and influencers amplify founder-led stories for a fraction of the price of TV ads. Lean teams also mean speed. A promotional decision that might take a mature brand six weeks "can take less than 10 minutes for an insurgent brand," says Charlotte Apps, a consumer-brands expert at Bain.

After years of passing on price increases that outpaced inflation without devoting enough attention to keeping their brands fresh, Big Food now faces a dilemma. Stocks of companies including Campbell's, Nestlé, PepsiCo and General Mills have dropped in the past three years while the S&P 500 has climbed around 80%.

In past crises, Big Food has typically reached for one of four playbooks, says TD Cowen analyst Robert Moskow: slash costs, as the private-equity firm 3G did with the Kraft-Heinz merger; pursue scale through mergers, as in General Mills' $10.4 billion purchase of Pillsbury over two decades ago; sit tight and wait for conditions to improve; or sacrifice near-term margins by reinvesting in brands and resetting the business.

History, Moskow argues, shows that reinvestment works best — even if it requires sacrificing near-term margins. That can mean spending more on ads or improving quality.

Apps, the consumer-brands expert at Bain, highlights products that have managed to stay culturally relevant, such as Oreo and Dr Pepper. Both have kept their core offerings fresh with new flavors and marketing that reaches younger and more-diverse audiences, while holding on to loyal ones.

Targeted acquisitions are another route. PepsiCo's purchase of Poppi, the acquisition of LesserEvil by Hershey, and Campbell's deal for the parent of Rao's sauce show how incumbents can bolt on growth. But achieving success can be tricky. The pre-Covid wave of acquisitions had some success stories, such as General Mills' acquisition of the mac-and-cheese brand Annie's, but also failures including Campbell's misadventures in fresh smoothies and salsa. Bain research shows the acquired brands' growth rates typically fall by as much as 50% postdeal — partly because they are bought at a more mature stage, but also because large companies often struggle to nurture them.

Still, reshaping portfolios appears to be inevitable. Some ideas Moskow suggests include Hershey's expansion into premium chocolate, Conagra's purchase of on-trend snack brands and General Mills' cutting of underperforming ones.

Big Food has little choice but to reinvent itself for the new moment. It will take patience and a lot of capital. But the greater risk lies in standing still.

Write to David Wainer at david.wainer@wsj.com

By Evie Liu

Fast-casual restaurants have spent the past decade convincing diners they could deliver fresher food and a better experience than fast food, minus the wait or high price of a sit-down meal. It worked — until this year. Now those chains are pushing up against the limits of that marketing pitch.

Fast-casual chains are struggling with the same reality that plagued fast food a year ago: consumers are tired of paying more at restaurants after rounds of price hikes. Many are skipping dining out, opting to cook more at home. Even more affluent diners are balking at paying $15 or more for a salad or burrito bowl.

As a result, the middle tier — too pricey for value seekers, too limited for premium spenders — is getting squeezed. Promotions at fast-food giants McDonald's and Restaurant Brands International's Burger King are pulling in budget-conscious customers, while sit-down restaurants like Darden Restaurants' Olive Garden and Texas Roadhouse appear to be better options for date nights, friend gatherings, or special occasions.

The rising economic pressure on Gen-Z, a major group of consumers behind fast-casual chains, has contributed to the weakness, said Benchmark analyst Todd Brooks. He noted that federal student loan payment collections restarted in May, while the unemployment rate for recent college graduates has grown to 5.8% in March 2025, up from 4.1% two years ago.

"We believe that these headwinds are leading younger consumers to cut their frequency of visiting their favorite fast-casual concepts," wrote Brooks in a note to investors last month.

For years, Chipotle Mexican Grill has been the fast-casual category's gold standard, opening dozens of new stores each quarter and minting profits enviable across the industry. But its most recent quarter was the weakest in memory: Same-store sales fell by 4% from a year ago, even as overall revenue rose thanks to new locations.

Likewise, chicken chain Wingstop saw a 2% drop in comparable sales for the three months ended in June, the first time in three years after many quarters of over 20% gains. Comparable sales at Mediterranean chain Cava Group were up only 2% in the latest quarter, significantly down from the 11% growth in the three months prior and the 21% growth two quarters ago.

That kind of slip might not sound disastrous, but for companies that had built a reputation on never missing a beat, it rattled investors. Chipotle shares have declined 30% year to date, Cava lost nearly 45%. Wingstop shot higher earlier this year, but started tumbling after the latest earnings report, and are now down 15% for the year. None are trading like growth darlings anymore.

Sweetgreen, the salad chain that once saw over 20% revenue growth each quarter, had it even worse. Despite the hype about its automated kitchen that would cut costs and boost profit, investors are more concerned about its soft top-line. Total sales barely increased last quarter, while existing restaurants saw a steep 8% drop in revenue. The stock has plunged 75% this year.

To be sure, fast-casual chains still have plenty of room to open new stores and increase top-line growth. But when same-store sales are soft, investors start to wonder if expansion is masking deeper problems, and they might not be willing to pay a premium for growth in an unpredictable economic environment.

About one year ago, Wingstop and Cava shares were trading at around 18 times the estimated sales for the forward fiscal year. That is more than double the valuation of mature fast-food chains like McDonald's.

Fast-casual, though, isn't going away. People still like the idea of fresher, better food on the go. But in 2025, it turns out that what people like even more is value. Until these chains prove that they can deliver both, investors should expect more turbulence in the sector.

Wall Street has largely kept its faith: Most analysts maintain a Buy or Hold rating for fast-casual stocks, with average target prices much higher than current levels. With the group trading at historically low valuations, many believe the stocks are an attractive opportunity now. Chipotle and Cava, particularly, appear to have a better chance to bounce back.

BTIG analyst Peter Saleh said Chipotle stock is being punished for the perception of expensive menu prices across the fast-casual segment. According to a pricing survey from BTIG, an average entree at Chipotle costs $10.31, much less than competitors like Cava and Sweetgreen, whose prices are typically 30% to 40% higher, approaching $15.

"Chipotle can do much more to highlight its value proposition," wrote Saleh in a September report, noting that the burrito chain has recently started referencing a specific price point in its advertising, the first time in his years of coverage.

Stifel analyst Chris O'Cull is encouraged by Chipotle's recent rollout and advertising of the "Build Your Own" meal, which could feed four to six individuals at an attractive price. "The offering has the potential to drive incremental group occasions as customer awareness increases," the analyst wrote in a recent report.

For Cava, the weaker-than-expected comparable sales were partly due to particularly strong results last year. Sales at Cava's new restaurant openings in 2024 were ramping up faster than management expected. As the early boost moderates and sales level off, the new restaurants have dragged on 2025's results.

This demonstrated the "power and the strength" of the Cava brand, said CEO Brett Schulman at a meeting with analysts last month, "It really underscores the demand that the consumer has for our product, how we resonate in all parts of the country, and underscores the opportunity that we have that lies ahead."

Sales in the second half of 2024 were also boosted by the successful introduction of grilled steak, which has created a higher bar to meet. Last month, the chain launched the limited-time chicken shawarma that can be added to bowls or pita wraps, while salmon is a new menu item set for next year. If successful, these items could attract more customers and improve store traffic.

The company has redesigned its loyalty program to better engage with its ardent fans. It's also reaching scale in many markets where marketing — a lever they have barely touched — could become a powerful driver, said Stifel's O'Cull: "We see the recent weakness as a temporary setback, not a change in the fundamental outlook."

After the recent pullbacks, Chipotle and Cava stocks are trading at 4.5 and 6.3 times forward sales, respectively — both cheaper than McDonald's now.

Write to Evie Liu at evie.liu@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

By David Wignall

The great majority of wealthy parents are giving their adult children financial support, according to a new survey by Ameriprise. Three-quarters of the survey's 554 respondents are footing the bill for their adult children's big-ticket items, like down payments on homes or tuition for graduate degrees. Nearly two-thirds are also covering ongoing costs like phone bills.

The results demonstrate the prominent role the "Bank of Mom and Dad" now plays in the life of America's mass-affluent class. But that bank may not be turning a profit. More than a third, or 36%, of respondents worry that supporting their children could hamper their own retirement plans.

Deana Healy, Ameriprise's vice president of financial planning and advice, says poor communication is part of the problem. If parents don't clarify which expenses are off-limits, they can end up on the hook later in life. And their children may not take steps to become financially independent.

Several factors explain why parents are getting more involved. First, the cost of housing and education has been rising rapidly in real terms. Second, young people are achieving major milestones, including full-time work and parenthood, later in life, partially due to rising college participation. Third, today's baby boomers are the richest generation in history. They therefore have more resources to dedicate to their children. So they do.

Email: editors@barrons.com

Last Week

Markets

The government shut down after Senate votes on a continuing resolution failed. Gold surged, the dollar fell, and the S&P 500 and Dow industrials hit highs. The White House withdrew its nominee to run the Bureau of Labor Statistics, which shut down without releasing its payroll data; ADP said the U.S. lost 32,000 private jobs in September; and the Supreme Court said governor Lisa Cook can stay at the Federal Reserve for now. On the week, the Dow and the S&P rose 1.1%, while the Nasdaq Composite gained 1.3%.

Companies

U.K.-based AstraZeneca will list its shares directly in New York. The Securities and Exchange Commission allowed Dimensional Fund Advisors to add exchange-traded fund share classes to its mutual funds. Pfizer agreed to lower drug prices to Medicaid in exchange for tariff relief, selling through TrumpRX, a consumer website. The U.S. is taking 5% stakes in Lithium Americas and in its Nevada project with General Motors.

Deals

Car parts dealer First Brands declared bankruptcy, with $10 billion to $50 billion in liabilities, mostly from private lenders... Electronic Arts announced its $55 billion buyout, the largest ever, by Saudi investors, Jared Kushner's Affinity Partners, and Silver Lake...The Financial Times said BlackRock's Global Infrastructure Partners was close to buying AES for $38 billion, and Bloomberg reported GIP was near a deal for Aligned Data Centers for $40 billion... Berkshire Hathaway is buying Occidental Petroleum's OxyChem business for $9.7 billion.

Next Week

Monday 10/6

Four S&P 500 index companies release earnings this week. It will be the calm before the storm, as third-quarter earnings season unofficially kicks off on Oct. 14, with the big banks reporting. Constellation Brands announces quarterly results on Monday, followed by McCormick on Tuesday. Delta Air Lines and PepsiCo hold conference calls to discuss earnings on Thursday.

Wednesday 10/8

The Federal Open Market Committee releases the minutes from its mid-September monetary-policy meeting. The FOMC cut the federal-funds rate by a quarter of a percentage point to 4%-4.25% at that confab, with newly appointed Fed governor Stephen Miran dissenting in favor of a half-a point rate cut. Traders are fully expecting another quarter-point cut at the FOMC's late-October meeting.

Friday 10/10

The University of Michigan releases its Consumer Sentiment survey for October. Consensus estimate is for a 54.5 reading, slightly less than September's 55.1. Consumers' expectations for the year-ahead inflation was 4.7% in September, and 3.7% for longer-run inflation. There has been a deep disconnect for several years between a rising stock market and dour consumer sentiment.

The Numbers

267%

The rise in electricity costs over the past five years in areas adjacent to significant data-center activity.

140

Average minutes spent on social media per day by users over 16 at the end of 2024, down 10% from 2020.

$1.3 T

Global M&A deal volume in the third quarter, up 40% year over year, fueled by a series of megadeals.

19 K

The number of private-equity funds in the U.S., some 5,000 more than McDonald's restaurants.

Write to Robert Teitelman at bob.teitelman@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

By Nicholas G. Miller

Ameren Missouri President and Chairman Mark Birk retired after 24 years with the company.

The public utility company said Friday that Chief Financial Officer Michael Moehn was elected to replace Birk as interim chairman.

Moehn previously was chairman and president of the company from 2014 to 2019.

Write to Nicholas G. Miller at nicholas.miller@wsj.com