OPEC Admits Defeat

Ain't no Brent crude high enough.

The Financial Times reported on Thursday that Saudi Arabia, the biggest and most influential member of the Organization of the Petroleum Exporting Countries, is abandoning its previous goal of driving the price of an oil barrel up to $100. It's a rare admission of defeat from OPEC, and a sign that not even cartel power can offset slowing inflation.

No Oil for Troubled Waters

Since the spring, the price of oil has been falling (with a few jump scares along the way), and OPEC+ — which is like OPEC, but has a few more countries thrown in — has continued the production cuts it began in late 2022 to keep the price from dropping further. A barrel of oil sits at around $71 today, down from an April high of roughly $91.

Earlier this month, the price of oil hovered around a three-year low, with sluggish import demand from China acting as a major depressor:

• "There's almost no oil demand growth in the advanced economies this year," Clay Seigle, an oil market strategist, told Reuters earlier this month, adding that "fiscal stimulus in China has not boosted the construction sector; that's one big reason Chinese demand for diesel is shrinking."
• China is still battling to cushion the dramatic fall in its real estate market, with President Xi Jinping leading a Politburo meeting on Thursday. An official statement said the government must "work to halt the real estate market decline and spur a stable recovery," per CNBC's translation.

Sources told the FT that although a barrel price of around $100 is needed to balance Saudi Arabia's budget, Crown Prince Mohammed bin Salman is worried about losing market share to non-OPEC countries like the US.

It's just like they say: If you can't beat 'em, join 'em. Sometimes that means entering a burgeoning sector that just so happens to compete with yours.

On Thursday, banking giant Citigroup and asset management giant Apollo Global announced an alliance to source $25 billion worth of deals in the next half-decade in the private credit market. The area was once seen as competition for banks, but now increasingly involves them.

Where Private Credit is Due

Private credit, simply put, means loans handed out by lenders like Apollo (that aren't banks). The benefit for debtors is that private credit is less regulated, so  lenders can shell out cash to risky borrowers that most banks normally wouldn't touch.

The International Monetary Fund estimated earlier this year that private credit is now a $2 trillion industry — JPMorgan thinks it's more like $3 trillion, and BlackRock thinks it'll hit $3.5 trillion by 2028. Little wonder that banks, initially threatened, have started to find ways to get in on the action: Wells Fargo partnered with Centerbridge on a $5 billion direct lending fund, and Société Générale started a €10 billion ($11.2 billion) fund with Brookfield Asset Management. The exclusive partnership between Citi and Apollo is the latest ambitious development:

• Citigroup will use its investment banking connections to source debt deals from its clients, taking a fee for each transaction. Apollo and its partners will pony up the money, initially focused on non-investment grade lending (it's riskier stuff that Federal Deposit Insurance Corporation-backed lenders like Citi generally wouldn't directly finance).
• Partners, you say? Mubadala Investment Company, one of the sovereign wealth funds of the Abu Dhabi government, and Athene, Apollo's insurance arm, are joining the venture.

"This is where the industry is going," Jim Zelter, Apollo's co-president, told Bloomberg. "Citi goes from a very active M&A banker with a few tools to having the complete toolbox."

The popular real estate platform Zillow has long rated homes on things like walkability and school districts. Now it'll let you know if you need to worry about wildfires or extreme weather, too.

On Thursday, the company announced it will be adding climate risk scores and insurance information to for-sale listings on its online marketplace — saving millions of home-searching millennials from asking, "Wait, why does my dream house have such a low asking price?"

Home Ownership? In This Climate?

Climate risks have reshaped the economics of homeownership in the US. The price of home insurance has spiked by an average of 33% since 2019, according to a recent New York Times data analysis. Meanwhile, major insurance firms are ditching high-risk states altogether: Now, 12% of all US homeowners live without insurance, up from just 5% in 2015, according to the Insurance Information Institute.

As a result, major climate risk affects more new home listings today than just five years ago, according to new data from First Street that's now incorporated into Zillow listings:

• Just over 55% of new homes listed in August were at risk of extreme heat, while roughly 33% were at risk of extreme winds, nearly 17% were at risk of major wildfires, and 13% were at risk of flooding.
• The riskiest areas are exactly where you'd expect: More than 70% of August listings in the Riverside, California metro area are at major wildfire risk, followed by Sacramento (47%). Nearly 77% of New Orleans listings had major flood risks. Cities like Cleveland, Columbus, Milwaukee, Indianapolis, and Minneapolis each saw less than 10% of listings carrying major climate risks — in an extreme climate world, paradise is cold weather and warm bowls of chili.