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Recession Fears Can't Curb The Commodity Boom – OilPrice.com

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Recession Fears Can’t Curb The Commodity Boom | OilPrice.com


Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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  • Fears of a looming recession weighed on oil prices this week.
  • Analysts are predicting that commodities could plunge if key economies enter a recession.
  • Supply constraints and strong demand for oil and copper have spurred a small rebound in prices.

Oil Prices

Earlier this week, Brent crude fell below $100 per barrel for the first time in months. So did West Texas Intermediate. Copper dropped to the lowest in almost two years. It looked like inflation had done its evil deed. A recession was coming, and demand for commodities was about to plunge. And then both oil and copper rebounded. It lasted all of one day, although the price of copper has been fluctuating with the flow of news from China and the prospects of its economy for the rest of the year and the medium term. The latest copper price rebound was, in fact, attributed by some to the possibility that the Chinese government would provide additional stimulus to keep the economy going at a healthy pace.

The rebound in oil, however, was easy to see coming despite the notorious uncertainty of oil markets. And the reason it was easy to see coming was fundamentals. Whatever happens in the speculative market, the fact that the global supply of oil is tight while demand is very much alive and still rising cannot be ignored.

The Financial Times out it quite clearly. In an article from earlier this week addressing the price drop across commodities, the authors said that “Hedge funds have been central to the recent price declines across commodities — selling out of long, or positive, positions in certain commodities and often replacing them with bearish wagers.”

If the big scare of 2020 and 2021 was Covid, this year has two: Russia’s Vladimir Putin and recession. And it is increasingly looking like the latter is overtaking the former in terms of scare value.

Talk about recession is all over the news. Central banks are being targeted with criticism for tightening monetary policy too fast, accelerating recessionary pressure. It was only a matter of time before hedge funds decided to play it safe and start selling out. But, and this is the important bit, this has nothing to do with fundamentals. Fundamentals are why oil was up a day after the dip.

Just how much nothing market price movements have to do with actual demand and supply sometimes was recently highlighted by Wells Fargo. According to the bank’s investment strategy division, the United States, the world’s largest oil consumer, is already in a recession.

“There’s the technical part of the recession, but then there’s the meaningful deterioration in consumption and employment,” Wells Fargo Investment Institute’s senior global market strategist Sameer Samana told Bloomberg this week. “The technical part is a first half story and the brunt of the unemployment and consumption is the second-half,” Samana added.

Inflation, according to Wells Fargo analysts, has proven to be much faster and more broad than initially expected, consumer sentiment has as a result worsened, and businesses are changing their spending plans. But oil demand is still robust as it appears to be across the world, even though some analysts are projecting a decline. According to Citi’s Ed Morse, for example, “Almost everybody has reduced their expectations of demand for the year.” Demand was “simply not growing on an empirical basis to the degree that people had expected,” Morse told Bloomberg TV.

Related: Buffett Buys Another $700 Million In Occidental Shares

Demand might not be growing per expectations—it would have been a wonder at these prices—but supply is not exactly booming, either, which was what probably motivated Saudi Arabia’s latest price hike for Asian buyers to near-record levels. Sellers don’t tend to hike their prices when they expect demand for their goods to decline.

No wonder, then, that Goldman Sachs, unlike Citi, says that oil could yet hit $140 per barrel, even with all the recession fears swirling around the market. “$140 is still our base case because, unlike equity, which are anticipatory assets, commodities need to solve for today’s mismatched supply and demand,” Goldman’s Damien Courvalin told CNBC this week.

These price projections, both from Citi and from Goldman, do not factor in supply disruptions—the same supply disruptions that just a couple of months ago, even a month ago, held markets captive. The disruptions are mainly expected to come from Russian oil exports, but this may have by now been factored into prices as there are still close to six months until the European Union’s oil embargo enters into effect.

Meanwhile, alternatives to this supply for Europe remain few and far between simply because of the size of Russian oil exports to the continent. This would likely continue having a bullish effect on oil prices, whatever the economic trends. Even if a recession dampens the demand for oil, it would take quite a while for real demand destruction of the kind that Citi says could push oil to $65 per barrel. 

Recession fears have solid foundations. There is little doubt about it. Commodity fundamentals, however, not only in oil and gas but in agricultural commodities and metals, have not changed just because hedge funds have suddenly started worrying about a recession. They are still tight. And this is putting a floor under prices that will remain there as long as supply remains tight.

By Irina Slav for Oilprice.com

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Canadian Inflation Cools But Hot Core Keeps Up Rate Pressure – Bloomberg

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[unable to retrieve full-text content]

  1. Canadian Inflation Cools But Hot Core Keeps Up Rate Pressure  Bloomberg
  2. Canada’s inflation rate falls to 7.6 per cent  CBC News
  3. Inflation in Canada slows in July, rising 7.6 per cent from last year  Yahoo Canada Finance
  4. EDITORIAL: Inflation still hurting Canadians  Toronto Sun
  5. CityBiz: Latest report on inflation in Canada, home sales slide again  CityNews
  6. View Full coverage on Google News



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Where to look for cheap rent in Canada, as prices soar, again – CBC.ca

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As rent prices spiked over the past two months, affordable pockets of rental housing became harder and harder to find.

In July, the average monthly cost for rental properties across Canada was $1,934 — up 10.4 per cent over last year, according to the data of the property listing company Rentals.ca. A similar hike in June saw the average rent spike 9.5 per cent.

Analysts say the steep prices are being driven by more demand than inventory.

And that demand is being driven in part by some people fleeing larger cities, while others flock to them.

This creates a challenge for people like Joan Alexander.

The senior has rented homes across Canada, in St. Catharines, Ont., and Guelph, Ont., then in Castlegar, B.C., and for the past two years on Prince Edward Island.

Joan Alexander, left, sits with her dog Beau and her partner, Elizabeth Huether. They plan to move from P.E.I. to Lloydminster, Alta./Sask., this October. (Submitted by Joan Alexander )

Alexander and her partner chose Summerside, a city about 50 kilometres northwest of Charlottetown, for its small-town feel.

But rising rental costs and other considerations — like proximity to health care — are driving her to relocate.

“We really hoped that P.E.I. would be our last stop on our life journey,” she said. 

Last year, rents on P.E.I. rose higher than they had in a decade. Plus rental places are scarce.

Finding affordable rental housing in Canada after a pandemic is proving a challenge for many, with spiking interest rates, inflation and limited rental stock. 

Ben Myers, president of Bullpen Research and Consulting, a real estate advisory firm that tracks rental pricing in Canada, says if you are looking for a deal there still are some places he’d describe as comparatively “cheap.”

This two-bedroom in Lloydminster, Sask., offers a 1,000 square foot corner unit in a quiet building for $1,250 per month. (Aspen Grove/Kijiji)

He suggests looking at Red Deer or Lethbridge in Alberta, or Saskatoon.

“You can get a two-bedroom for under $1,150 a month. It’s all about where you can work,” said Myers. 

Alexander says she was able to find a few havens on the Prairies.

“It felt almost too good to be true. There seemed to be a few pockets where we could find what we were looking for. Pet friendly, affordable, safe housing,” said Alexander, who needs monitoring after donating a kidney and a place that welcomes her small, beloved dog — Beau.

Lloydminster — a city that spans Alberta and Saskatchewan — attracted Alexander and her spouse with affordable prices and a pet-friendly property owner.

They move in October to their new $1,200-per-month home.

WATCH | Priced out by rising rents:

Soaring prices leaving some renters priced out

1 day ago

Duration 2:03

While the housing market may be cooling down, the rental market is on fire, with the price of an average unit up 10 per cent compared to last year. That has left many renters scrambling to find suitable housing.

Rentals.ca listings include detached and semi-detached homes, townhouses, condominium apartments, rental apartments and basement apartments. The company can’t provide an average rent for all cities. Some smaller communities don’t have enough rentals to get an accurate average.

So it’s worth hunting. There are some hidden gems.

Myers says that in a normal year, rent can fluctuate on average three to five per cent. But average rents grew 10 to 12 per cent in 2019, due to a shortage of supply, he says. Then the pandemic hit and rent declined, on average, 15 to 20 per cent.

“We are now adjusting back to pre-pandemic levels,” said Myers.

Renters on the move

Then there are the super-expensive anomalies — like Vancouver, which rebounded even faster from the pandemic, with a per month average rent of $2,300 in June 2022. 

Myers says there have also been significant shifts to cities that used to enjoy low rent, as some people migrate to smaller places where they can get more real estate for their dollar.

Retiring Baby Boomers from the Toronto area are creating demand and raising prices in places like the Niagara Region and Halifax, for example. 

“Halifax has gone kind of nuclear. Definitely a lot of Ontarians moved to Halifax during the pandemic,” Myers said.

Also, he says a lot of students stayed in their university towns like Victoria, London, Ont., and Kingston, Ont., when offices closed during the past two years.

“All the benefits of living in a big city were almost bad because you didn’t want to be around a lot of people during a pandemic,” said Myers. 

Vanishing affordable rentals

But all this change has just put more pressure on the rental market that’s been seeing declines in rental options for low earners for more than a decade, according to housing policy researcher Steve Pomeroy.

He uses Canada Mortgage and Housing Corporation (CMHC) data to probe losses in the rental market.

Pomeroy, the senior research fellow for the Centre of Urban Research at Carleton University, estimates that between 2011 and 2016, the number of rental units that would be affordable for households earning less than $30,000 per year — with rents below $750 — declined by 322,600 in Canada.

That has an effect on the one in three Canadians who rent, according to 2016 census data.

Pomeroy says historically Quebec offered the largest rental stock available in the country.

“Quebec has always been culturally very different. Rent is much more culturally accepted. It’s a bit about European influence … You get these very scenic estates of two-, three-storey homes with the wrought iron staircase and with three units, and two are rented. So by definition, two-thirds of your population are renters,” he said.

He says perhaps it’s time for the remainder of Canada to consider a more European model, where renting is more accepted. 

He says there are many cities, in France and Germany for example, where renters almost match owners in population.

North America historically has had a different culture, where owning is seen as better.

“Traditionally there has been very strong support for home ownership. Here in Canada we’ve had mortgage insurance including increasing access to credit for buyers … the political system has very much reinforced that belief system, that ownership is the right thing to do.”

In Red Deer, Alta., this two-bedroom townhome rents for $1,220 per month if you opt for the smaller one with no den. It even comes with energized parking stalls. (Sunreal Property Management Ltd./Rentfaster.ca)

But now, tenancy and anti-poverty organizations are lobbying for more renters’ rights. That’s something Pomeroy sees as a positive shift.

He also says he believes many younger Canadians see renting as their future. It gives them the freedom to pursue experiences, move for jobs and not remain tethered to a property that they can’t afford.

Pomeroy recently asked his graduate students — all employed and in their 20s — if they thought they could buy a home in the next five years. Would you want to?

He says he was surprised to hear for the first time, none of them believed they could.

“Nobody thought they could, and only about half actually wanted to.”

The average monthly cost for rental properties across Canada in July was $1,934 — up 10.4 per cent over last year — making it harder still for renters to find affordable housing. (David Horemans/CBC)

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WTI Stops Slide As API Figures Show Major Gasoline Draw – OilPrice.com

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WTI Crude Falls To Lowest Level Since January | OilPrice.com


Julianne Geiger

Julianne Geiger

Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.

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Crude oil prices fell further on Tuesday, with WTI falling to its lowest benchmark price since January this year.

Crude oil prices began their fall on Monday, dragged down by China’s disappointing economic data that led to China’s central bank cutting lending rates.

WTI prices fell to $86.13 per barrel by 2:24 pm ET, down $3.28, or 3.67% on the day. Brent crude fell $2.98 (-3.13%) on the day to $92.12 per barrel—the lowest price since February this year.

Gasoline prices in the United States have been falling for months now led by falling crude oil prices. Today’s gasoline prices in the United States average $3.949 per gallon, according to AAA data, down from $3.956 yesterday. Over the last month, U.S. gasoline prices have fallen 60 cents. They are still 76 cents above where they were this time last year.

The weight of disappointing data out of China—the world’s second-largest oil consumer and largest oil importer—was compounded on Tuesday by developments surrounding the Iran nuclear deal. Just moments before the deadline, Iran sent its written response to the EU regarding the “final” nuclear deal text. In its letter, Iran suggested that it was closer than it had ever been to securing a deal, although there were a few sticking points—mainly that the U.S. guaranteed the deal couldn’t be changed by future U.S. Presidents.

Despite the current crude oil fundamentals that suggest the market is still tight, the market fear is that Iran could unleash on the market hundreds of thousands of barrels of crude oil per day if sanctions were to be lifted. Iran has said that it could ramp up production and exports within months.

By Julianne Geiger for Oilprice.com

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