China's Contribution to Lower Gas Prices: Record US Oil Output Plays a Key Role
Crude oil prices have dropped by almost 20% since September due to reduced Chinese demand and a significant increase in US oil production
Prices of oil and gas are at risk of rising due to the ongoing conflict in Europe and the Middle East, extended production cuts by OPEC+ (led by Saudi Arabia and Russia), and an increase in demand for heat this winter.
Crude oil prices have experienced a significant decrease since mid-October. Last week, oil prices reached their lowest point since July (although they slightly increased on Monday), approaching bear market territory with a nearly 20% decline from September highs. On a related note, the average cost for a gallon of gas in the United States has also dropped, currently standing at $3.37, as reported by AAA. This figure represents a decline from $3.78 a year ago and $3.63 a month ago.
The AAA spokesperson mentioned that if oil prices continue to fall, the current slow decline in gas prices might accelerate. Traders are not anticipating any impact on energy supplies due to the ongoing Middle Eastern hostilities. However, their major concern lies in the economic weakness in China and the rise in oil production in the United States.
According to David Kelly, chief global strategist at JPMorgan Asset Management, neither the US, Iran, nor any regional oil producers have responded to the conflict in a way that would affect global oil supplies. The initial concern that the conflict would raise global energy prices has not been proven so far. Additionally, with the decrease in crude oil prices and refining spreads, there is an expectation of significant declines in energy prices in the October CPI (Consumer Price Index) release scheduled for this Tuesday and the November CPI release on December 12th, coinciding with the start of the final FOMC (Federal Open Market Committee) meeting of 2023.
The United States has been extracting oil at unprecedented levels, leading to an increase in supply and a decline in prices. In the opening week of November, the US achieved a remarkable milestone of producing 13.2 million barrels of crude oil per day. Consequently, the United States' impact on global oil markets has experienced substantial growth, mirroring the rising influence of China on demand.
However, there is growing apprehension that China's declining economy could lead to a slowdown in the market there.
In October, Chinese exports experienced a 6.4% decline, according to a report from China's National Bureau of Statistics. Additionally, consumer prices in China decreased by 0.2% during the same month. On another note, Chinese refiners have requested a reduction in crude supply from Saudi Arabia for December. However, in contrast to these developments, oil prices saw a 1% increase on Monday based on OPEC's market report, which emphasized the resilience of the market fundamentals and attributed the price dip to speculators.
In a note, Craig Erlam, senior market analyst at OANDA, highlighted that the OPEC monthly oil market report countered concerns about demand, challenging exaggerated negativity surrounding Chinese demand. The report also raised demand growth forecasts for this year and maintained them for next. Consequently, Brent crude increased by 1.34% to $82.52 a barrel on Monday, while West Texas Intermediate rose by 1.41% to $78.26 a barrel. Despite expectations of an economic slowdown, prices remained stable on Tuesday, following the International Energy Agency's decision to increase its forecasts for oil demand growth in the coming years.
Home Depot is still suffering from the housing market slowdown
However, the IEA also noted that supply was surpassing initial forecasts and predicts that the global market may shift from a deficit in the last quarter of this year to a surplus in the first quarter of 2024.
Home Depot's earnings were lower due to a decline in sales. However, it managed to exceed expectations from Wall Street.
Consumer spending on home improvement projects has decreased compared to the levels observed during the pandemic. Nevertheless, the company highlighted that there is still a certain level of growth in smaller improvement jobs, which are crucial for its business. This information was reported by Chris Isidore, my colleague.
CEO Ted Decker noted a consistent involvement of customers in smaller projects, while also acknowledging challenges in high-value discretionary categories. The company generated $3.8 billion, equivalent to $3.81 per share, during the third quarter ending on October 29, reflecting a 12% decrease compared to the previous year's $4.3 billion. Analysts surveyed by Refinitiv had predicted earnings per share of $3.76. Revenue showed a decline of 3%, amounting to $37.7 billion, slightly surpassing the projected $37.6 billion.
Sales at stores open at least a year fell 3.1% as a slowing in the housing market continued to be a headwind for the company.
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Heres how much you need to make to afford a home in America
According to an annual report from the National Association of Realtors, the income of an average American homebuyer increased from $88,000 to $107,000 over the past year, while the issue of home affordability significantly deteriorated.
The annual increase of 22% is the highest ever recorded, making it difficult for many families in the United States with a median income of around $75,000 to afford homeownership, according to the Census Bureau. Furthermore, the report highlights a shifting trend in the composition of households able to purchase homes, with families burdened by higher expenses due to having children being increasingly pushed away from the possibility of owning a home.
The highest recorded share in this study revealed that 70% of recent buyers did not have a child under the age of 18 in their home, which is quite overwhelming. In contrast, in 1985, only 42% of households did not have a child under the age of 18.
Recent buyers consisted of 59% married couples, marking the lowest share since 2010. However, the shares of single female buyers and single male buyers saw an increase, reaching 19% and 10% respectively. Unmarried couples made up approximately 9% of the buyer population.
The diversity of homebuyers increased this year, as the percentage of white homebuyers decreased from 88% to 81% compared to last year. Out of recent homebuyers, 7% were Latino, 7% were Black, 6% were Asian or Pacific Islander, and 6% identified as another race. Furthermore, among first-time homebuyers, 38% identified as non-White or Caucasian, while only 17% of repeat buyers did the same.
