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Australia’s Building Approvals Jump in July

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Australia’s building approvals climbed by the most in the years in July, putting an end to the downward trend seen in recent months.

The approvals rose 11.3 percet to 20,987, the largest increase since September 2013 and the second-highest monthly figure in the history of the release, the Australian Bureau of Statistics reported.

While this is an impressive headline figure, it has been attributed to a mere surge in housing approvals, with little effect on the growing concerns of apartment glut in some of Australia’s largest cities.

Paul Brennan, Josh Williamson, and Vivian Jiang of Citi’s economics research team, voiced their concerns over the enormous lift in apartment construction in parts of Melbourne and Brisbane, Australia’s second and third-largest cities.

“Brisbane already is in oversupply, and Melbourne is on the way to oversupply,” the Citi team wrote. “When account is taken of approvals, only Sydney has underlying demand slightly higher than the level of approvals. This reflects the relatively greater scale of previous undersupply in Sydney in the ten years prior to the current construction boom.”

Citi suggested that “the extent of oversupply will depend on whether developers proceed or not with all the approvals to build… If this trend [of building all approvals] continues, as seems likely given no prospect of the RBA tightening, the risk of oversupply will increase”. In their view, “the developing oversupply will continue to build into 2017 and 2018”, and that “will intensify settlement risks which so far are low”.

Apartments surged by 23 percent to 11,393, leaving them up 15.7 percent on the levels of a year earlier.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Brent Crude Rises to $69 on IEA Report

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Oil prices rose after the release of the International Energy Agency’s (IEA)  closely-watched Oil Market Report, with WTI Crude trading at above $66 a barrel and Brent Crude surpassing the $69 per barrel mark.

Prices jumped even though the agency revised down its full-year 2021 oil demand growth forecast by 270,000 barrels per day (bpd) from last month’s assessment, expecting now demand to rise by 5.4 million bpd. The downward revision was due to weaker consumption in Europe and North America in the first quarter and expectations of 630,000 bpd lower demand in the second quarter due to India’s COVID crisis.

The excess oil inventories of the past year have been all but depleted, and a strong demand rebound in the second half this year could lead to even steeper stock draws, the IEA said yesterday, keeping an upbeat forecast of global oil demand despite the weaker-than-expected first half of 2021.

However, the upbeat outlook for the second half of the year remains unchanged, as vaccination campaigns expand and the pandemic largely comes under control, the IEA said.

Moreover, the global oil glut that was hanging over the market for more than a year is now gone, the agency said.

“After nearly a year of robust supply restraint from OPEC+, bloated world oil inventories that built up during last year’s COVID-19 demand shock have returned to more normal levels,” the IEA said in its report.

In March, industry stocks in the developed economies fell by 25 million barrels to 2.951 billion barrels, reducing the overhang versus the five-year average to only 1.7 million barrels, and stocks continued to fall in April.

“Draws had been almost inevitable as easing mobility restrictions in the United States and Europe, robust industrial activity and coronavirus vaccinations set the stage for a steady rebound in fuel demand while OPEC+ pumped far below the call on its crude,” the IEA said.

The market looks oversupplied in May, but stock draws are set to resume as early as June and accelerate later this year. Under the current OPEC+ policy, oil supply will not catch up fast enough, with a jump in demand expected in the second half, according to the IEA. As vaccination rates rise and mobility restrictions ease, global oil demand is set to soar from 93.1 million bpd in the first quarter of 2021 to 99.6 million bpd by the end of the year.

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Crude Oil

OPEC Expects Increase In Global Oil Demand Raises Members’ Forecast on Crude Supply

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The Organisation of Petroleum Exporting Countries (OPEC) yesterday lifted its forecast on its members’ crude this year by over 200,000 bpd and now expects demand for its own crude to average 27.65mn bpd in 2021.

This is almost 5.2mn bpd higher than last year and around 2.7mn b/d higher than an earlier estimate of the group’s April production.

According to the highlights of the organisation’s latest Monthly Oil Market Report (MOMR), OPEC crude is projected to rise from 26.48 million bpd in the second quarter to 28.7 million bpd in the third and 29.54 million bpd in the fourth quarter of the year.

The report also indicated a fall in Nigeria’s crude production from 1.477 bpd in February to 1.473, a difference of just about 4,000 bpd before rising again in April to 1.548 million bpd, to add 75,000 bpd last month.

OPEC stated that its upward revision of members’ crude was underpinned by a downgrade in the group’s forecast for non-OPEC supply, which it now expects to grow by 700,000 bpd to 63.6mn b/d against last month’s report’s projection of a 930,000 bpd rise to 63.83mn bpd.

The oil cartel projected that US crude output would drop by 280,000 bpd this year, compared with its previous forecast for a 70,000 bpd decline.

On the demand side, OPEC kept its overall forecast unchanged from last month’s MOMR, stressing that it expects global oil demand to grow by 5.95 million bpd to 96.46 million bpd this year, partly reversing last year’s 9.48mn bpd drop.

Spot crude prices fell in April for the first time in six months, with North Sea Dated and WTI easing month-on-month by 1.7 percent and 1 percent, respectively.

On the global economic projections, the cartel said stimulus measures in the US and accelerating recovery in Asian economies might continue supporting the global economic growth forecast for 2021, now revised up by 0.1 percent to reach 5.5 percent year-on-year.

This comes after a 3.5 percent year-on-year contraction estimated for the global economy in 2020.

However, global economic growth for 2021 remains clouded by uncertainties including, but not limited to the spread of COVID-19 variants and the speed of the global vaccine rollout, OPEC stated.

“World oil demand is assumed to have dropped by 9.5 mb/d in 2020, unchanged from last month’s assessment, now estimated to have reached 90.5 mb/d for the year. For 2021, world oil demand is expected to increase by 6.0 mb/d, unchanged from last month’s estimate, to average 96.5 mb/d,” it said.

The report listed the main drivers for supply growth in 2021 to be Canada, Brazil, China, and Norway, while US liquid supply is expected to decline by 0.1 mb/d year-on-year.

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Crude Oil

Oil Rises Over Concerns of Fuel Shortages

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Oil prices rose on Tuesday, as lingering fears of gasoline shortages due to the outage at the largest U.S. fuel pipeline system after a cyber attack brought futures back from an early drop of more than 1%.

Brent crude futures rose 35 cents, or 0.5%, to $68.67 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose 49 cents, or 0.8%, to $65.41.

Benchmark gasoline futures prices rose 1 cent to $2.14 a gallon.

On Monday, Colonial Pipeline, which transports more than 2.5 million barrels per day (bpd) of gasoline, diesel and jet fuel, said it was working to restore much of its operations by the end of the week.

Right now there’s a generalized anxiety premium being built into prices because of Colonial and it’s keeping a floor under the market,” said John Kilduff, partner at Again Capital LLC in New York.

Fuel supply disruption has driven gasoline prices at the pump to multi-year highs and demand has spiked in some areas served by the pipeline as motorists fill their tanks.

Traders booked at least four tankers to store refined oil products off the U.S. Gulf Coast refining hub after a cyber attack that knocked out the pipeline, shipping data showed on Tuesday.

North Carolina, the U.S. Environmental Protection Agency and Department of Transportation issued waivers allowing fuel distributors and truck drivers to take steps to try to prevent gasoline shortages.

OPEC on Tuesday raised its forecast for demand for its crude by 200,000 bpd and stuck to its prediction of a strong recovery in global oil demand this year as growth in China and the United States counters the coronavirus crisis in India.

Meanwhile, the rapid spread of infections in India has increased calls to lock down the world’s second-most populous country and the third-largest oil importer and consumer.

India’s top state oil refiners have already started reducing runs and crude imports as the new coronavirus cuts fuel consumption, company officials told Reuters on Tuesday.

On the bullish side for crude, analysts are expecting data to show U.S. inventories fell by about 2.3 million barrels in the week to May 7 after a drop of 8 million barrels the previous week, a Reuters poll showed.

Gasoline stocks are expected to have fallen by about 400,000 barrels, analysts estimated ahead of reports from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday.

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