Energy & Commodities


China’s Changing Policies Could Create A Huge Oil Demand Deficit

Figures released last week show that China’s crude oil imports in the first half of 2021 declined for the first time in eight years. China has been the world’s largest net importer of crude oil and other liquids in the world since September 2013 and almost on its own created the 2000-2014 commodities ‘supercycle’, characterized by consistently rising price trends for all commodities – including oil – that are used in a booming manufacturing and infrastructure environment. This oil consumption boom from China was a product largely of the 8+ percent average annual GDP growth recorded by the country over that period, with many spikes well above 10 percent. So does this sudden dip in oil imports in the first half of this year – against declining economic growth over the past few years – mean that a major supportive driver of oil prices has gone for good? A noticeable decline in the rate of economic growth in China began in 2012 when it dipped below the key 8 percent figure for the first time since 1990. Since then the true number for China’s GDP growth has been a matter of considerable conjecture as, although the official annual figures have always been above at least 6 percent, traders and analysts are aware that the numbers are subject to extreme political pressures that could not tolerate headline GDP figures of, say, just 3 percent per year, where a number of traders and analysts think it is. Whatever the real figure, the fact remains that up until this latest data release for the first half of this year, China has still accounted for the consumption of 10-14 million barrels per day (bpd) of crude oil since 2012, crossing the 10 million bpd of crude oil imports level in 2019, having overtaken the U.S. as the world’s biggest net importer of crude oil in 2017. Read More.

A Timely End for the Uptrend, Greater Vancouver Homes Resist $2M Price Barrier

Greater Vancouver detached properties fails in the latest attempt to surpass the two million price barrier. Even as prices reach their highest point in history of $1.982M during June, the average sale price is barely above the aggressive uptrend. The pending break to the uptrend will result in a market reversal and the reemergence of price volatility. In addition to the pending trend reversal, the sales totals have greatly diminished from their recent all time highs experienced in March.

Another abating factor to future price increase is the rising inventory levels as homeowners look to reap the benefits of the sudden 24% increase to the average sales price over the past 12 months. Typically as home values increase, so do the listings.

As the current uptrend comes to a likely end, home values will begin to consolidate their recent gains. The obvious question becomes how low will values go? Eitel Insights anticipates a tepid 8% – 10% correction to occur. That implies values to peak around the $2M barrier and will backtrack to $1.830M the previous market peak. There is a possibility that values take a sharper downturn, as the market did not accrue the $363,000 year over year increase based on natural market behaviour. Instead values were artificially boosted by historically low interest rates, the BoC bailing out the secondary mortgage market which in turn supported the banks and CMHC. This allowed the banks to offer mortgages to the sudden monumental spike of demand for detached properties born out of the pandemic. Should the average sales price break back into the previous market cycle below $1.830M, values would very likely find their bottom around $1.725M (-13%).

Even though average sale prices increased out of “unnatural” market factors, there is no mandate that says values will come back to their “rightful” values, if there is such a thing. Instead of values tumbling back to affordable prices, home sale prices are likely to take a temporary pause before the next major push higher. As evidenced by the last sudden 22% increase during June 2013 ($1.120M) to February 2014 ($1.367M). The rapid uptrend was unable to sustain itself for a prolonged period of time. After values peaked in Feb 2014, there was a correction of 13% by July 2014 ($1.184M), and home values did not surpass the 2014 price peak until the following February ($1.402M). While the 2014 break out was a false break, the following year of a market consolidation was the last opportunity to purchase before another major increase to $1.816M in January 2016. The resulting growth phase from July 2014 ($1.184M) to January 2016 was a substantial 53% increase .

Similarly, Eitel Insights anticipates a major price injection after the pending market lull. A market driven growth phase typically ranges from 40 – 56% price increase over the past 16 years. The conservative side of the range implies values could reach as high as $2.8M (41% increase) during the next growth cycle. The next growth cycle is likely to occur as immigration returns in a big way, including international investors. Rising interest rates will spur on another phase of FOMO as interest rates increase, the buyers will be eager to purchase before further escalation occurs.

The reopening of interprovincial travel, and the lifting of covid restrictions undoubtedly had a negative effect on total inventory during June. June’s 4,781 active listings signalled the first decline since December 2020 with only 2,762 active listings, the lowest total on the chart. Equally important the current level of active listings is similar to the August 2020 peak inventory of 4,823.

Inventory levels have historically peaked during the summer months, however over the several years the trend has been for inventory to peak during August or September. This is likely to be the case for 2021, as potential sellers list with eyes towards selling their properties at peak values.


Sales have fallen back from their near term highs of 1,973 during March 2021, June finished with 1,272 completions. Well above the preceding three year sales channel of sub 950 sales in every month (2017 – 2020). With sales returning inside of the historical sales channel, the data will likely find support thanks to the upturned in the near term, as inventory levels have evolved to peak later in the year, so has the sales yearly peaks. As the inventory rises during the last summer and early fall, sales will likely take another leg higher, before dropping below the current uptrend during winter.

The supply demand metrics continued to narrow from the extreme demand driven market during March 2021. Demand has shrunk from a 2.296 level to 0.528 while the supply has risen from -1.357 to -0.680. Resulting in the demand driven gap to decrease 56% from 3.653 in March to 1.208 in June 2021.

Not all areas inside of Greater Vancouver will react equally during the upcoming months. For individual area market analysis, or to become and Eitel Insights client contact us.

It’s official: The Covid recession lasted just two months, the shortest in U.S. history

The Covid-19 recession is in the books as one of the deepest — but also the shortest — in U.S. history, the official documenter of economic cycles said Monday.

According to the National Bureau of Economic Research, the contraction lasted just two months, from February 2020 to the following April.

Though the drop featured a staggering 31.4% GDP plunge in the second quarter of the pandemic-scarred year, it also saw a massive snapback the following period, with previously unheard of policy stimulus boosting output by 33.4%.

“In determining that a trough occurred in April 2020, the committee did not conclude that the economy has returned to operating at normal capacity,” the NBER said in a news release. “The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession associated with the February 2020 peak. The basis for this decision was the length and strength of the recovery to date.”

The pandemic recession was unique in a number of ways, not least how fast the contraction happened and how ferocious the recovery was.

Conventionally, a recession is defined as two consecutive quarters of negative GDP growth, which this recession met after the first quarter in 2020 fell 5%. But the NBER noted that in normal times, a recession lasts “more than a few months.”…read more.

The Oil Industry Is Borrowing Again, But This Time It’s Different

Two years ago, Wall Street banks were on their way out of a long-term relationship with the oil industry. Now, with oil prices over $70 for the first time in three years, big bond buyers are snapping up oil bonds once again.

Only there is a condition this time.

The Wall Street Journal’s Joe Wallace and Collin Eaton wrote this week that Wall Street was buying bonds from non-investment-grade U.S. energy companies, which took advantage of record low interest rates to raise some $34 billion in fresh debt in the first half of the year.

That’s twice as much as the industry raised over the same period last year. But investors don’t want borrowers to use the cash to drill new wells. They want them to use it to pay off older debt and shore up balance sheets.

It makes sense, really, although it is a marked departure from how banks normally react to oil industry crises. The 2014 oil price collapse, in hindsight, may have been the last “normal” crisis. Oil prices fell, funding dried up, supply tightened, prices went up, banks were willing to lend again, and producers poured the money into boosting production.

Since then, however, the energy transition push has really gathered pace and banks have more than one reason to not be so willing to lend to the oil industry. With the world’s biggest asset managers setting up net-zero groups to effectively force their institutional clients to reduce their carbon footprint and with the Biden administration throwing its weight behind the push for lower emissions, banks really have little choice but to follow the current. Their own shareholders are increasingly concerned about the environment, too…read more.

Mike’s Comment – July 17th

It doesn’t matter what party you support – there’s one question politicians, media and the public should answer before we get into a federal election campaign.

Canadian New Vehicle Sales Print The Second Worst May In Over Two Decades

Canadians are suddenly pulling back on their new vehicle buying binge. Statistics Canada (Stat Can) data shows new vehicle sales grew on an annual basis in May. Sadly, it wasn’t because the market was experiencing robust growth. It was due entirely to the base effect of comparing sales to an early pandemic month. Zooming out, it was the second slowest May since 1997.

Why Do I Care About New Vehicle Sales?
New vehicle sales are a huge signal for the economy. For someone to buy a new vehicle, they have to be confident in their ability to pay for it. If someone is confident about their ability to buy an expensive item, they have job stability. People confident in their future income continue to spend and borrow.

A similar observation can be made about truck buying and the housing industry. In a building boom, more contractors need more vehicles. If they’re being squeezed on margins because, oh, I don’t know, lumber made it unprofitable. They tend to stick with their own vehicle. That’s in addition to auto manufacturing being a large industry. A slowdown (or ramp up!) of new vehicle sales can actually tell us a lot.

Canadian New Vehicle Sales Had The Second Weakest May Since 1997
Canadian new vehicle sales are slowing, though the base effect muddles the numbers. There were 151,912 new vehicles sold in May, down 8.9% from a month before. Compared to a year before sales are 30.8% higher, though last year was extremely low, due to the pandemic…read more.