- U.S. Housing Starts Fell 9% in September
Housing starts fell for the second straight month in September, but builders received more permits, a sign residential construction could pick up in the coming months.
Building permits issued for privately owned housing units rose 6.3% in September from the prior month to a seasonally adjusted annual rate of 1.225 million, the Commerce Department said Wednesday.
Permits for single-family homes, about 60% of all permits, rose to a rate of 739,000, up 0.4% last month.
Housing starts fell 9.0% in September to an annual rate of 1.047 million, as starts on multifamily buildings dropped sharply. But single-family starts continued to climb, rising 8.1% in September to a rate of 783,000.
Economists surveyed had expected overall September permits to rise to a 1.17 million annual rate and starts to rebound to a 1.18 million pace. Construction typically begins a month or two after a permit is issued.
Monthly housing figures are often choppy and can be subject to large revisions. August permits were revised up to a 1.152 million rate from 1.139 million. August starts were revised to 1.150 million from 1.142 million.
September’s rise in permits, based on a survey of local governments, had a margin of error of 1.9 percentage points. Last month’s decline in starts, based on a survey of builders and homeowners, came with a margin of error of 9.2 percentage points.
Through the first nine months of the year, permits were up 0.6% compared with the same period in 2015, though that mainly reflected a drop in permits for buildings with five or more units. Single-family permits were up 8.1%, year to date.
Starts were up 3.7% through September, and single-family starts were up 8.6% through the nine months.
Both permits and starts fell sharply in the years leading up to the recession, as the housing crisis took hold, and remained near all-time low levels for two years after the recession ended. The construction gauges have rebounded since 2011, but the pace of gains slowed over the past year.
Relatively stronger momentum for single-family home construction suggests that builders are responding to rising prices and steady demand for that segment, while construction of larger multifamily projects is slowing.
Sales of existing homes, about 90% of the housing market, have grown fairly strongly this year, reaching a postrecession peak in June, according to the National Association of Realtors. Steady job growth, wage gains and low interest rates on mortgages have supported home buying. But low inventory of new and existing homes is driving up prices, putting a purchase out of reach of some would-be buyers.
A National Association of Home Builders survey this week showed builders are still fairly confident in the single-family housing market for new homes. The gauge of home-builder sentiment slipped from a year-high of 65 to 63 in October, but still stood at the second-highest level of 2016.
The Realtors group will release data on existing-home sales for September on Thursday. The Commerce Department’s September report on new-home sales is due out Oct. 26.
Egbin Decries N388B NBET Debt, Idle Capacity
Egbin Power Plc, the biggest power station in Nigeria, has said it is owed N388bn by the Nigerian Bulk Electricity Trading Plc for electricity generated and fed into the national grid.
The company disclosed this on Tuesday during an oversight visit by the Senate Committee on Privatisation, led by its Chairman, Senator Theodore Orji, to the power station, located in Ikorodu, Lagos.
The government-owned NBET buys electricity in bulk from generation companies through Power Purchase Agreements and sells it to the distribution companies, which then supply it to the consumers.
The Group Managing Director, Sahara Power Group, Mr. Kola Adesina, told the lawmakers that the total amount owed to Egbin by NBET included money for actual energy wheeled out, interest for late payments and available capacity payments.
Egbin is one of the operating entities of Sahara Power Group, which is an affiliate of Sahara Group. The plant has an installed capacity of 1,320MW consisting of six turbines of 220 megawatts each.
The company said from 2020 till date, the plant had been unable to utilize 175MW of its available capacity due to gas and transmission constraints.
Adesina said, “At the time when we took over this asset, we were generating averagely 400MW of electricity; today, we are averaging about 800MW. At a point in time, we went as high as 1,100MW. Invariably, this is an asset of strategic importance to Nigeria.
“The plant needs to be nurtured and maintained. If you don’t give this plant gas, there won’t be electricity. Gas is not within our control.
“Our availability is limited to the regularity of gas that we receive. The more irregular the gas supply, the less likely there will be electricity.”
He noted that if the power generated at the station was not evacuated by the Transmission Company of Nigeria, it would be useless.
Adesina said, “Unfortunately, as of today, technology has not allowed the power of this size to be stored; so, we can’t keep it anywhere.
“So, invariably, we will have to switch off the plant, and when we switch off the plant, we have to pay our workers irrespective of whether there is gas or transmission.
“Sadly, the plant is aging. So, this plant requires more nurturing and maintenance for it to remain readily available for Nigerians.
“Now, where you have exchange rate move from N157/$1 during acquisition in 2013 to N502-N505/$1 in 2021, and the revenue profile is not in any way commensurate to that significant change, then we have a very serious problem.”
He said at the meeting of the Association of Power Generation Companies on Monday, members raised concern about the debts owed to them.
He added, “All the owners were there, and the concern that was expressed was that this money that is being owed, when are we going to get paid?
“The longer it takes us to be paid, the more detrimental to the health and wellbeing our machines and more importantly, to our staff.”
Adesina lamented that the country’s power generation had been hovering around 4,000MW in recent years.
Oil Rises on U.S. Fuel Drawdowns Despite Surging Coronavirus Cases
Oil prices climbed on Wednesday after industry data showed U.S. crude and product inventories fell more sharply than expected last week, reinforcing expectations that demand will outstrip supply growth even amid a surge in Covid-19 cases.
U.S. West Texas Intermediate (WTI) crude futures rose 48 cents, or 0.7%, to $72.13 a barrel, reversing Tuesday’s 0.4% decline.
Brent crude futures rose 34 cents, or 0.5%, to $74.82 a barrel, after shedding 2 cents on Tuesday in the first decline in six days.
Data from the American Petroleum Institute industry group showed U.S. crude stocks fell by 4.7 million barrels for the week ended July 23, gasoline inventories dropped by 6.2 million barrels and distillate stocks were down 1.9 million barrels, according to two market sources, who spoke on condition of anonymity.
That compared with analysts’ expectations for a 2.9 million fall in crude stocks, following a surprise rise in crude inventories the previous week in what was the first increase since May.
Traders are awaiting data from the U.S. Energy Information Administration (EIA) on Wednesday to confirm the drop in stocks.
“Most energy traders were unfazed by last week’s build, so expectations should be high for the EIA crude oil inventory data to confirm inventories resumed their declining trend,” OANDA analyst Edward Moya said in a research note.
On gasoline stocks, analysts had expected a 900,000 barrel decline drop in the week to July 23.
“The U.S. is still in peak driving season and everyone is trying to make the most of this summer,” Moya said.
Fuel demand expectations are undented by soaring cases of the highly infectious delta variant of the coronavirus in the United States, where the seven-day average for new cases has risen to 57,126. That is about a quarter of the pandemic peak.
Oil Price Rises To $74.70 Despite Delta Variant
Oil price inched higher on Tuesday despite the fast spreading COVID-19 Delta variant. Brent crude oil, against which Nigerian oil is priced gained, $0.20 or 0.27 percent to $74.70 per barrel on Tuesday at 12:05 am Nigerian time.
Delta variant is spreading in China, the world’s largest importer of crude oil, forcing crude oil investors to start cutting down on their oil demand projections.
“The Delta variant is still spreading and China has started to clamp down on teapots, so their import growth would not be that much,” said Avtar Sandu, a senior commodities manager at Singapore’s Phillips Futures, referring to independent refiners.
Strong U.S. demand and expectations of tight supplies have helped crude oil to recover from a 7 percent slump recorded last Monday to mark their first gains in two to three weeks last week.
Global oil markets are expected to remain in deficit despite a decision by the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, to raise production through the rest of the year.
“There is seemingly a battle within the energy complex between the prevailing supply deficit engineered by OPEC+ and the threat of the COVID-19 Delta variant in regions with low vaccination rates,” said StoneX analyst Kevin Solomon.
“The slow take-up of vaccinations will continue to limit some upside in oil demand in those regions, and there will be intermittent spells in the recovery in the coming months.”
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