Oil fell the most in three months as Federal Reserve Chair Jerome Powell doubled down on his determination to curb the hottest inflation in decades with more aggressive rate hikes.
West Texas Intermediate dropped to US$109.56, shedding 6.8 per cent, the biggest daily drop since March. Powell this week openly endorsed for the first time raising interest rates well into restrictive territory, a strategy that’s often resulted in an economic downturn and could blunt energy consumption. On Friday he reiterated that the Fed is focused on returning inflation to its 2 per cent target.
“All the headlines seem to have turned bearish for oil and that could see further technical selling target the psychological US$100 a barrel level,” said Edward Moya, senior market analyst at Oanda.
“Once this move lower is complete, oil should stabilize and trade comfortably above the US$100 a barrel level as potential disruptions from either further sanctions on Russia oil or hurricane season will keep supplies at dangerously low levels,” he said.
Fears that rising interest rates and a slowdown in economic growth will lead to demand destruction have gripped the market but in the long run, supplies still look tight, market participants said.
“I don’t think the selloff will continue as we have major supply shortfalls such as in non-OPEC non-US production and OPEC spare capacity; fundamentals for energy remain bullish and we recommend buying the dips,” Christyan Malek JPMorgan Global Head of Energy Strategy.
Russia’s invasion of Ukraine has compounded global price increases and helped to drive up the cost of everything from food to fuels. US retail gasoline prices have repeatedly broken records and the national average recently topped US$5 a gallon. The White House is weighing limits on fuel exports to try to alleviate the pain at the pump.
Crude is still up more than 50 per cent this year as rebounding demand combined with upended trade flows following Russia’s invasion of Ukraine to squeeze the market. All commodity price moves have become more extreme as market liquidity has slumped and if crude comes under Western secondary sanctions oil could spike sharply higher, JPMorgan Chase & Co. analysts including Natasha Kaneva wrote in a report.
- WTI for July delivery fell US$8.03 to end the session at US$109.56 a barrel
- Brent for August settlement lost US$6.69 to settle at US$113.12 a barrel.
As the war in Ukraine continues, the focus remains on the extent to which Russian oil flows will be altered. On Friday, the country’s Deputy Prime Minister Alexander Novak said throughput at the nation’s refineries could fall 10 per cent this year.
Metro Vancouver house prices plunge as interest rate rises – Business in Vancouver
“Buyers, your time is now,” real estate agent says as home prices fall across the region | Photo: Chung Chow
A forecast from TD Bank that B.C. average home prices will fall by 8.1 per cent by next year appears too optimistic in Metro Vancouver as June sale prices dropped for the third straight month.
The June composite benchmark price for all residential properties in Greater Vancouver was $1,235,900, down 2 per cent from May and a 2.2 per cent decrease over the past three months, reports the Real Estate Board of Greater Vancouver.
Detached house prices are seeing the largest dollar decline, down an average of $37,000 per month since March to a June benchmark price of $2,058,600.
On the bellwether Vancouver West Side market, the median price for a detached house plunged $194,000 from May to $3,063,500 in June.
“We’re seeing downward pressure on home prices as we enter summer due to declining home buyer activity, not increased supply,” said Daniel John, REBGV Chairman.
Total residential sales in Greater Vancouver totalled 2,444 in June 2022, a 35 per cent decrease from June 2021, and a 16.2 per cent decrease from the 2,918 homes sold in May 2022.
The Fraser Valley Real Estate Board (FVREB) processed 1,281 sales in June, down 5.8 per cent compared to May and a 43 per cent plunge compared to June of last year.
“In just two months our market overall has shifted into balance, mainly due to a softening of demand for single-family detached homes,” said FVREB president Sandra Benz, who noted the effect of rising mortgage rates.
Fraser Valley detached house price dropped 3.5 per cent, or $57,855, month-to-month to a June benchmark of $1,653, 000 reports the Fraser Valley Real Estate Board.
The Bank of Canada, which has increased its trend-setting interest rate 75 basis points since March, is expected to jack the rate from 50 to 75 basis points on July 6 to fight inflation.
This will trigger a further decline in home sales and prices, according to TD Bank. In a June 30 report, TD forecast that B.C. will see among the sharpest corrections, with average home prices falling by 8.1 per cent into 2023.
The price drops and increased supply should be welcome by homebuyers, according to real estate agents.
“In most areas of Metro Vancouver and especially at higher price points, it is a buyer’s market now,” said Kevin Skipworth, managing partner with Dexter Associates Real Estate in Vancouver.
He pointed to the city of Vancouver strata sector as especially enticing due to increased supply and falling prices. The benchmark price of a townhouse in the city dropped nearly 2 per cent in June from a month earlier and condo prices fell 2.3 per cent month-to-month, with the biggest decline in the trendy West Side.
“Vancouver’s West Side has seen townhouses and condos go up to five-month’s supply from three months last year,” Skipworth said. “What a switch and an opportunity compared to a year ago. Buyers, your time is now.”
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