Showing posts with label Prices. Show all posts
Showing posts with label Prices. Show all posts
Monday, June 4, 2012
Sunday, February 26, 2012
Oil Prices to Extend Gains, Threatening Global Recovery
Oil prices are poised to gain for the third straight week, undermining global equity market sentiment and threatening the fragile economic recovery, CNBC's weekly survey of market sentiment showed.
A CNBC poll of analysts and traders showed 12 out of 16 respondents, or 75 percent, expect oil prices to rise this week. Three believe prices will fall and one expects no change. Though the bulls comprise the overwhelming majority, many are lightening long positions, or bets that prices will rise, as they believe the recent rally is showing signs of fatigue."You have to trade from the buy side but I would be reducing my long positions ahead of the weekend," said Tom James, Chairman & Co-Founder, Navitas Resources, in an email on Thursday. "The fundamentals in the physical market don't support the current short term price." James added that he was looking to add long positions on any pullback in Brent crude to $115. "Target for the year is now $150 on longer term basis for Brent."Brent crude [LCOCV1 Loading... () 
] hit a record high in Euro terms last Thursday at 93.60 euros per barrel as supply concerns escalated. U.S. crude futures [CLCV1 Loading... () ] settled at just under $110 a barrel on Friday, recording their biggest weekly gain in two months. For the week, U.S. crude rose 6.3 percent, the most since the week to Dec. 23.Dhiren Sarin, Chief Technical Strategist, Asia-Pac at Barclays Capital, who correctly predicted Brent's move above $120, is switching to a more neutral bias for U.S. crude. "On balance, having been bullish for two weeks... we are sensitive to a correction or, in the least, a pause above $103.40/75" for WTI, Sarin said.However, John Licata, CEO and Chief Commodity Strategist at Blue Phoenix, expects U.S. crude futures to gain momentum over Brent."WTI is about to see a rally at the expense of Brent as facts like France getting just 3 percent of oil from Iran and Britain not taking Iranian oil deliveries in 6 months cause a contract allocation shift into WTI," Licata said.This shift will further be fueled by a lack of refining capacity in the Northeast U.S. and concerns surrounding militant attacks on oil installations in Nigeria by the Movement for the Emancipation of the Niger Delta, Licata said. According to him, outside Iran, Nigeria is a "very big factor" for global oil markets because the U.S. is a big buyer of Nigerian crude.Gasoline Surge?Numerous respondents this week are warning higher retail gasoline prices could threaten the fragile economic recovery in the U.S.David Kotok, chairman and chief investment officer, of Cumberland Advisors said an additional penny a gallon on gasoline translates roughly to a $1.4 billion decrease in U.S. annual spending power."A big uncertainty premium is building" in the price of crude oil because of the geo-political uncertainty, Kotok wrote in a weekly commentary. "We remain overweight energy."The average U.S. price of gasoline jumped 18 cents a gallon in the past two weeks to $3.69 on Feb. 24, according to the nationwide Lundberg Survey, Reuters reported.But supplies of fuel remained plentiful in most of the country, the survey found.At $4.24 a gallon, San Diego had the highest average price for regular unleaded gasoline on Feb. 24, while the lowest price was $3.07 a gallon in Denver.Some believe gasoline prices may average $4.50 a gallon or as high as $5.00, damaging demand ahead of the peak summer driving season.Blue Phoenix's Licata said record gasoline prices in February are "troubling and could be the precursor for $4.50 plus gasoline this summer." That, he explained, could create another 'Prius Effect' and "delay economic growth, which unlike in 2008 supports more hybrid car/PHEV (plug-in hybrid electric vehicle) demand. However with no real widespread substitute of oil on a mainstream level, I believe near-term the real long idea is to be bullish for WTI versus Brent."Shelley Goldberg, Director, Global Resources & Commodities Strategy at Roubini Global Economics said "demand destruction is already kicking in as the U.S. is psychologically reluctant to fill up the tank with gasoline nearing $4 a gallon at the pump while the U.K., from a currency standpoint, faces ever rising petrol prices."Meanwhile, policymakers are issuing warnings about the rise in global oil prices. In its final communique after the two-day meeting of finance ministers and central bankers, the G20 noted risks to growth from rising oil prices, which jumped to a nearly 10-month high above $125 a barrel on Friday. The G20 welcomed pledges by oil producers to ensure adequate supply.![]()
A CNBC poll of analysts and traders showed 12 out of 16 respondents, or 75 percent, expect oil prices to rise this week. Three believe prices will fall and one expects no change. Though the bulls comprise the overwhelming majority, many are lightening long positions, or bets that prices will rise, as they believe the recent rally is showing signs of fatigue."You have to trade from the buy side but I would be reducing my long positions ahead of the weekend," said Tom James, Chairman & Co-Founder, Navitas Resources, in an email on Thursday. "The fundamentals in the physical market don't support the current short term price." James added that he was looking to add long positions on any pullback in Brent crude to $115. "Target for the year is now $150 on longer term basis for Brent."Brent crude [LCOCV1 Loading... () ] hit a record high in Euro terms last Thursday at 93.60 euros per barrel as supply concerns escalated. U.S. crude futures [CLCV1 Loading... () ] settled at just under $110 a barrel on Friday, recording their biggest weekly gain in two months. For the week, U.S. crude rose 6.3 percent, the most since the week to Dec. 23.Dhiren Sarin, Chief Technical Strategist, Asia-Pac at Barclays Capital, who correctly predicted Brent's move above $120, is switching to a more neutral bias for U.S. crude. "On balance, having been bullish for two weeks... we are sensitive to a correction or, in the least, a pause above $103.40/75" for WTI, Sarin said.However, John Licata, CEO and Chief Commodity Strategist at Blue Phoenix, expects U.S. crude futures to gain momentum over Brent."WTI is about to see a rally at the expense of Brent as facts like France getting just 3 percent of oil from Iran and Britain not taking Iranian oil deliveries in 6 months cause a contract allocation shift into WTI," Licata said.This shift will further be fueled by a lack of refining capacity in the Northeast U.S. and concerns surrounding militant attacks on oil installations in Nigeria by the Movement for the Emancipation of the Niger Delta, Licata said. According to him, outside Iran, Nigeria is a "very big factor" for global oil markets because the U.S. is a big buyer of Nigerian crude.Gasoline Surge?Numerous respondents this week are warning higher retail gasoline prices could threaten the fragile economic recovery in the U.S.David Kotok, chairman and chief investment officer, of Cumberland Advisors said an additional penny a gallon on gasoline translates roughly to a $1.4 billion decrease in U.S. annual spending power."A big uncertainty premium is building" in the price of crude oil because of the geo-political uncertainty, Kotok wrote in a weekly commentary. "We remain overweight energy."The average U.S. price of gasoline jumped 18 cents a gallon in the past two weeks to $3.69 on Feb. 24, according to the nationwide Lundberg Survey, Reuters reported.But supplies of fuel remained plentiful in most of the country, the survey found.At $4.24 a gallon, San Diego had the highest average price for regular unleaded gasoline on Feb. 24, while the lowest price was $3.07 a gallon in Denver.Some believe gasoline prices may average $4.50 a gallon or as high as $5.00, damaging demand ahead of the peak summer driving season.Blue Phoenix's Licata said record gasoline prices in February are "troubling and could be the precursor for $4.50 plus gasoline this summer." That, he explained, could create another 'Prius Effect' and "delay economic growth, which unlike in 2008 supports more hybrid car/PHEV (plug-in hybrid electric vehicle) demand. However with no real widespread substitute of oil on a mainstream level, I believe near-term the real long idea is to be bullish for WTI versus Brent."Shelley Goldberg, Director, Global Resources & Commodities Strategy at Roubini Global Economics said "demand destruction is already kicking in as the U.S. is psychologically reluctant to fill up the tank with gasoline nearing $4 a gallon at the pump while the U.K., from a currency standpoint, faces ever rising petrol prices."Meanwhile, policymakers are issuing warnings about the rise in global oil prices. In its final communique after the two-day meeting of finance ministers and central bankers, the G20 noted risks to growth from rising oil prices, which jumped to a nearly 10-month high above $125 a barrel on Friday. The G20 welcomed pledges by oil producers to ensure adequate supply.Rents Keep Rising, Even as Housing Prices Fall
The housing market remains a potent drag on the economy as home prices continue to slip, foreclosed homes fill some neighborhoods and millions of construction workers scramble for jobs. 
But one group is sitting pretty: landlords. Unlike home prices, rents have been rising, up 2.4 percent in January from a year earlier, according to recent data, not adjusted for inflation, released by the Labor Department. With few rental buildings erected over the last few years, available units are going fast. Nationwide, the apartment vacancy rate is down to 5.2 percent, its lowest level in more than a decade, according to the research firm Reis Inc. Rent increases are greatest in places like San Francisco, Austin, Texas, and Boston, where technology companies in particular are hiring, as well as in New York City and the District of Columbia. But cities like Chicago and Seattle, where house prices are still declining quite sharply, have had rental increases, too. “We are more of a renter nation than we have been for a while,” said Christopher J. Mayer, a professor of real estate at the Columbia University Business School. Economists suggest favorable conditions for landlords will continue for at least a year, with employment gradually rising and construction of new apartments remaining constrained. As job growth has begun to accelerate in recent months, young people are starting to move out of their parents’ homes or away from shared rooms and into their own rentals. Families who might previously have bought homes are also staying in rentals longer. They may be waiting for the housing market to hit bottom or finding it difficult to qualify for a mortgage. Many others remain uncertain about their job prospects and wary of the obligations of ownership. When Charles Griffith moved with his wife and two children to Orlando, Fla., last fall, they chose a new two-bedroom apartment for $1,140 a month. They left a four-bedroom house they had bought a decade ago in Antioch, Calif. His brother-in-law has moved in and taken over the mortgage payments. Mr. Griffith, who works as a supervisor for Southwest Airlines [LUV Loading... () ] , and his wife, a customer service representative for the airline, are enjoying the flexibility and convenience of renting, as well as amenities like a pool. “We kind of like the situation now of not having to be under so much pressure,” said Mr. Griffith, 40, adding that the family may eventually buy in Orlando. But “with the economy and the airline industry, that factors into us thinking maybe we should hold off for a while.” The home ownership rate has been falling from its peak of 69.4 percent in 2004, according to census data. By the fourth quarter of 2011, it was down to 66 percent. That means about two million more households are renting, said Kenneth Rosen, an economist and professor of real estate at the Haas School of Business at the University of California, Berkeley. Not all those people are choosing apartments, of course. Some are moving into single-family homes left vacant by foreclosures. Eager to capitalize on the trend, investors are scooping up some houses at a deep discount and leasing them to tenants who have lost their own homes. Several prominent hedge funds and private equity firms have recently announced plans to invest in distressed properties and convert them to rentals. And earlier this month, the government solicited applications from investors interested in buying pools of foreclosed properties held by Fannie Mae, Freddie Mac and the Federal Housing Administration. Still, it is in apartments, not houses, where renters are feeling the most competition. Although many families crushed by the recession have doubled up and plenty of underemployed 20-somethings are living with their parents, some young people are finally getting their own space. Nearly 60 percent of job gains in the last two years have gone to people who are 20 to 34, a crucial rental group, according to an analysis of Labor Department data by G. Ronald Witten, a consultant to apartment companies. During the economic downturn, apartment developers retrenched. The number of new apartments completed fell from 284,200 in 2006 to less than half that number in 2011, according to census data. The limited supply is pushing up prices in some markets. In San Francisco, rents jumped close to 5 percent last year, according to Reis, and increases averaged 3 percent in Austin and New York. Landlords have also been withdrawing incentives like a free month’s rent. Liz Brent and Matt Mochizuki moved into a studio apartment a year ago in the Mission District in San Francisco for $1,395 a month. Now they want more space. Ms. Brent, 26, makes costumes and is working as a barista at a cafe where customers leave big tips. Mr. Mochizuki, 27, has a steady job making custom metal work for a design studio. They are budgeting $1,800 a month in rent.
Current DateTime: 08:10:34 26 Feb 2012
LinksList Documentid: 22528753But at an open house for an apartment billed as a one-bedroom, they found a studio with an awkward layout and bad light. More than 40 people were in line, many ready to hand over a check. “That’s what the market is like now,” Ms. Brent said of their fruitless search. “That’s how many people showed up for this tiny apartment with no windows.” Some rental markets remain soft, like Atlanta and Las Vegas, the epicenter of the housing bust. Orlando, too, might seem an unlikely place for rental strength. The unemployment rate, at 9.7 percent, is higher than the national average, and home prices slipped 4.6 percent last year, according to the Standard & Poor’s Case-Shiller home price index. Yet Ric Campo, chief executive of Camden Properties, a real estate investment trust that owns apartment buildings, said rental business was brisk at its LaVina development. Since the office for the 420-unit complex opened last summer, more than half the apartments have rented. That’s “a faster rate than we’ve ever seen in Orlando,” Mr. Campo said. The company has raised the base rent on a two-bedroom apartment to $1,080, from $995 a month. Many now wonder about a more profound shift among future buyers. Matt Byford, a 24-year-old litigation consultant in Chicago, acknowledges that low interest rates and low prices favor buying. But he says he is renting and in no hurry to buy, because he doesn’t expect much to change soon. Brad Forrester, chief executive of the ConAm Group, which manages about 50,000 apartments in the western United States, says, “I think it’s going to be interesting to see whether there’s been a fundamental sociological shift in that 20- to 35-year-old cohort, where they literally say ‘this American dream just doesn’t work for me.’ ” This story originally appeared in The New York Times![]()
But one group is sitting pretty: landlords. Unlike home prices, rents have been rising, up 2.4 percent in January from a year earlier, according to recent data, not adjusted for inflation, released by the Labor Department. With few rental buildings erected over the last few years, available units are going fast. Nationwide, the apartment vacancy rate is down to 5.2 percent, its lowest level in more than a decade, according to the research firm Reis Inc. Rent increases are greatest in places like San Francisco, Austin, Texas, and Boston, where technology companies in particular are hiring, as well as in New York City and the District of Columbia. But cities like Chicago and Seattle, where house prices are still declining quite sharply, have had rental increases, too. “We are more of a renter nation than we have been for a while,” said Christopher J. Mayer, a professor of real estate at the Columbia University Business School. Economists suggest favorable conditions for landlords will continue for at least a year, with employment gradually rising and construction of new apartments remaining constrained. As job growth has begun to accelerate in recent months, young people are starting to move out of their parents’ homes or away from shared rooms and into their own rentals. Families who might previously have bought homes are also staying in rentals longer. They may be waiting for the housing market to hit bottom or finding it difficult to qualify for a mortgage. Many others remain uncertain about their job prospects and wary of the obligations of ownership. When Charles Griffith moved with his wife and two children to Orlando, Fla., last fall, they chose a new two-bedroom apartment for $1,140 a month. They left a four-bedroom house they had bought a decade ago in Antioch, Calif. His brother-in-law has moved in and taken over the mortgage payments. Mr. Griffith, who works as a supervisor for Southwest Airlines [LUV Loading... () ] , and his wife, a customer service representative for the airline, are enjoying the flexibility and convenience of renting, as well as amenities like a pool. “We kind of like the situation now of not having to be under so much pressure,” said Mr. Griffith, 40, adding that the family may eventually buy in Orlando. But “with the economy and the airline industry, that factors into us thinking maybe we should hold off for a while.” The home ownership rate has been falling from its peak of 69.4 percent in 2004, according to census data. By the fourth quarter of 2011, it was down to 66 percent. That means about two million more households are renting, said Kenneth Rosen, an economist and professor of real estate at the Haas School of Business at the University of California, Berkeley. Not all those people are choosing apartments, of course. Some are moving into single-family homes left vacant by foreclosures. Eager to capitalize on the trend, investors are scooping up some houses at a deep discount and leasing them to tenants who have lost their own homes. Several prominent hedge funds and private equity firms have recently announced plans to invest in distressed properties and convert them to rentals. And earlier this month, the government solicited applications from investors interested in buying pools of foreclosed properties held by Fannie Mae, Freddie Mac and the Federal Housing Administration. Still, it is in apartments, not houses, where renters are feeling the most competition. Although many families crushed by the recession have doubled up and plenty of underemployed 20-somethings are living with their parents, some young people are finally getting their own space. Nearly 60 percent of job gains in the last two years have gone to people who are 20 to 34, a crucial rental group, according to an analysis of Labor Department data by G. Ronald Witten, a consultant to apartment companies. During the economic downturn, apartment developers retrenched. The number of new apartments completed fell from 284,200 in 2006 to less than half that number in 2011, according to census data. The limited supply is pushing up prices in some markets. In San Francisco, rents jumped close to 5 percent last year, according to Reis, and increases averaged 3 percent in Austin and New York. Landlords have also been withdrawing incentives like a free month’s rent. Liz Brent and Matt Mochizuki moved into a studio apartment a year ago in the Mission District in San Francisco for $1,395 a month. Now they want more space. Ms. Brent, 26, makes costumes and is working as a barista at a cafe where customers leave big tips. Mr. Mochizuki, 27, has a steady job making custom metal work for a design studio. They are budgeting $1,800 a month in rent. Current DateTime: 08:10:34 26 Feb 2012
LinksList Documentid: 22528753But at an open house for an apartment billed as a one-bedroom, they found a studio with an awkward layout and bad light. More than 40 people were in line, many ready to hand over a check. “That’s what the market is like now,” Ms. Brent said of their fruitless search. “That’s how many people showed up for this tiny apartment with no windows.” Some rental markets remain soft, like Atlanta and Las Vegas, the epicenter of the housing bust. Orlando, too, might seem an unlikely place for rental strength. The unemployment rate, at 9.7 percent, is higher than the national average, and home prices slipped 4.6 percent last year, according to the Standard & Poor’s Case-Shiller home price index. Yet Ric Campo, chief executive of Camden Properties, a real estate investment trust that owns apartment buildings, said rental business was brisk at its LaVina development. Since the office for the 420-unit complex opened last summer, more than half the apartments have rented. That’s “a faster rate than we’ve ever seen in Orlando,” Mr. Campo said. The company has raised the base rent on a two-bedroom apartment to $1,080, from $995 a month. Many now wonder about a more profound shift among future buyers. Matt Byford, a 24-year-old litigation consultant in Chicago, acknowledges that low interest rates and low prices favor buying. But he says he is renting and in no hurry to buy, because he doesn’t expect much to change soon. Brad Forrester, chief executive of the ConAm Group, which manages about 50,000 apartments in the western United States, says, “I think it’s going to be interesting to see whether there’s been a fundamental sociological shift in that 20- to 35-year-old cohort, where they literally say ‘this American dream just doesn’t work for me.’ ” This story originally appeared in The New York Times
Obama: No 'Silver Bullet' to Halt Rising Gas Prices
President Obama says there is no easy answer to the problem of rising energy prices and he's dismissing Republican solutions as little more than gimmicks. 
"We know there's no silver bullet that will bring down gas prices or reduce our dependence on foreign oil overnight," Obama said Saturday in his weekly radio and Internet address. "But what we can do is get our priorities straight and make a sustained, serious effort to tackle this problem." Oil prices are approaching last year's highs as tensions increase over Iran's nuclear program. The rise pushed gasoline prices Friday to a national average of $3.65 a gallon, the highest ever for this time of year. A spike in gas prices is normal in spring, but it came earlier than usual this year in large part because of world fears that the growing confrontation with Iran will crimp oil supplies. Iran is the world's third-largest crude supplier. Rising oil prices weigh on the economy, pushing leisure and business travel costs higher. Every 1-cent increase in the price of gasoline costs the economy $1.4 billon, analysts say. Obama said Republicans have one answer to the oil pinch: drill. "You know that's not a plan, especially since we're already drilling," Obama said, echoing his remarks earlier in the week. "It's a bumper sticker." Obama is pushing what he calls an "all-of-the-above" approach to the problem of limited energy resources, meaning an attempt to seek out alternative energy sources while reducing consumption of traditional fuels. In the Republican address, Texas Sen. Kay Bailey Hutchison blamed the rise in gasoline prices partly on the Obama administration, which she said has blocked some potential new sources of oil and gas. "We can't slow down global demand for oil and gas, but we can do a lot more here at home to assure that we have the energy we need and to halt skyrocketing costs," she said. "President Obama's policy has resulted in an unprecedented slowdown in new exploration and production of oil and gas." For all the political claims, economists say there's not much a president of either party can do about gasoline prices. Certainly not in the short term. But it's clear that people are concerned — a new Associated Press-GfK poll says 7 in 10 Americans find the issue deeply important — so it's sure to be a political issue through the summer. The price of gasoline, which is made from crude oil, has soared with oil prices. The national average jumped by nearly 12 cents per gallon in a week, with state averages above $4 per gallon in California, Alaska and Hawaii. At $3.65 per gallon, gasoline is still below last year's high of $3.98 and the record $4.11 set in 2008. © 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.![]()
"We know there's no silver bullet that will bring down gas prices or reduce our dependence on foreign oil overnight," Obama said Saturday in his weekly radio and Internet address. "But what we can do is get our priorities straight and make a sustained, serious effort to tackle this problem." Oil prices are approaching last year's highs as tensions increase over Iran's nuclear program. The rise pushed gasoline prices Friday to a national average of $3.65 a gallon, the highest ever for this time of year. A spike in gas prices is normal in spring, but it came earlier than usual this year in large part because of world fears that the growing confrontation with Iran will crimp oil supplies. Iran is the world's third-largest crude supplier. Rising oil prices weigh on the economy, pushing leisure and business travel costs higher. Every 1-cent increase in the price of gasoline costs the economy $1.4 billon, analysts say. Obama said Republicans have one answer to the oil pinch: drill. "You know that's not a plan, especially since we're already drilling," Obama said, echoing his remarks earlier in the week. "It's a bumper sticker." Obama is pushing what he calls an "all-of-the-above" approach to the problem of limited energy resources, meaning an attempt to seek out alternative energy sources while reducing consumption of traditional fuels. In the Republican address, Texas Sen. Kay Bailey Hutchison blamed the rise in gasoline prices partly on the Obama administration, which she said has blocked some potential new sources of oil and gas. "We can't slow down global demand for oil and gas, but we can do a lot more here at home to assure that we have the energy we need and to halt skyrocketing costs," she said. "President Obama's policy has resulted in an unprecedented slowdown in new exploration and production of oil and gas." For all the political claims, economists say there's not much a president of either party can do about gasoline prices. Certainly not in the short term. But it's clear that people are concerned — a new Associated Press-GfK poll says 7 in 10 Americans find the issue deeply important — so it's sure to be a political issue through the summer. The price of gasoline, which is made from crude oil, has soared with oil prices. The national average jumped by nearly 12 cents per gallon in a week, with state averages above $4 per gallon in California, Alaska and Hawaii. At $3.65 per gallon, gasoline is still below last year's high of $3.98 and the record $4.11 set in 2008. © 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.Saturday, February 25, 2012
Market Positives Trump High Gas Prices: Homebuilders
New U.S. single-family home sales fell in January, but an upward revision to the prior months' data and a drop in the supply of properties on the market added to growing signs of a budding recovery in the housing sector. Sales of newly built homes are still stumbling along at historically low levels, but builders claim they are beginning to see the light at the end of a very long tunnel. Sales may not be surging back, but in some of the better local economies, buyer interest is. We saw it at open houses over the President's Day weekend, and it's starting to show up on line even more dramatically. Virginia-based NewHomesGuide.com, the website of New Homes Guide magazine, saw a 46 percent jump in unique visitors from December 2011 to January 2012 and a 47 percent jump from one year ago. Page views were up 59%. "We always see a seasonal jump in January," said Publisher, Leslie Stritmatter in a press release, "but the increases from the same period last year show this to be a much more significant bounce. I'm very hopeful that this is a sign of consumer confidence returning to the markets. Consumer sentiment is improving. "Right now the improving labor market trumped rising gasoline prices in influencing confidence, which is good in that new jobs and wages can help cushion the blow of an ever rising cost of living," says analyst Peter Boockvar at Miller Tabak. When it comes to housing, the same may be true of high affordability, improving employment, better confidence, record-low mortgage rates and lower-priced homes; they all trumprising gasoline prices. "We don't think there's going to be a big impact from gas prices because we have so many forces taking us to recovery," says Richard Kettler of Kettler/Forlines Homes. Kettler says they have seen a substantial increase recently in the number of visits to his homes, which largely straddle the suburbs and exurbs of Washington, DC. "The attitude of the home buyer is much better, they're more excited," he adds. He also notes there is now suddenly more interest in larger homes, not McMansions, but moving from the 2 thousand square foot range to 3000. Higher gas prices may not hit buyer demand overall, but they will affect some choices. "We are more sensitive today because of the economic scenario we are still recovering from," says Mark Fleming, chief economist at CoreLogic. "From a housing perspective, this impacts the exurban communities, as an increased cost of living will reduce demand to buy homes, and these are the same communities hit the hardest by the housing crash anyway." A study by the Federal Reserve in 2010 found that a 10 percent increase in gas prices reduces home construction by 10 percent after four years in locations with a long average commute time, compared with other locations. The effect of higher gas prices on home buyers will depend on how long the spike lasts. If consumers think it's temporary, they won't factor it as much into their decision. There are, however, continuing obstacles to the new home market. Sales are still barely above where they were last year, and last year was the worst on record for the nation's builders. This despite all the stimulus in the market. And as I'm writing this, Mr. Kettler just came out of his office, grumbling that one of his sales is being held up by an appraisal that came in too low. Questions? Comments? document.write("");document.write("RealtyCheck"+"@"+"cnbc.com");document.write('');And follow me on Twitter @Diana_OlickThursday, February 23, 2012
Where Are UK House Prices Headed?
Highlight transcript below to create clipTranscript: Print | Email Go Click text to jump within videoThu 23 Feb 12 | 03:30 AM ET Grainne Gilmore, head of UK residential research at Knight Frank, told CNBC, "It is very much a regional picture, the UK can¿t just be broad brush stroked with one figure, but if you look at the UK it is very much a patchwork effect the North is maybe not performing as well, when you further South things start to pick up and then when you hit London and especially the centre of London, prices are doing very well they are up 12 percent on the year, compared to an annual average of around one percent growth in 2011."Consumers Are Saved From High Gas Prices ... for Now
How much rising gasoline prices will pinch consumers has yet to be seen, but energy savings from the warm winter may have already helped consumers avoid some of the pain. 
Deutsche Bank chief U.S. economist Joseph LaVorgna crunched the numbers and says consumers may have seen about a third of the recent rise in gasoline prices offset by cheaper natural gas and lower utilities costs this winter. “To me it’s really more of a usage story than a price story,” said LaVorgna. “The savings is going to be disproportionate to the people that live in the northeast...for those people that it’s impacting, it does add up to lots of dollars.” Gasoline prices, however, are expected to continue to rise into the spring and are expected by analysts to top out above $4 a gallon, and the benefit from cheaper heating bills will also fade as the spring approaches. Economists are concerned that the consumer will start pulling back on other spending as gasoline nears $4 a gallon, a level it’s already reached in some areas. Certainly, as prices rise consumers also cut back on spending on gasoline, a bigger trend that has been in place over the past year. Last week alone, demand for gasoline dropped 6.4 percent from last year’s level. From the recent low in the week of Dec. 19, gasoline prices have risen by 29 cents to an average of $3.58 per gallon, during the week of Feb. 13. Oil prices have risen about 40 percent from their October low of around $75. West Texas intermediate was trading above $105 Wednesday on Nymex as tension surrounding Iran keeps prices high. “Our standard rule of thumb is that a one-cent increase in gasoline prices increases household energy consumption by approximately $1.4 billion,” notes LaVorgna. So, the recent price jump from December through the week of Feb. 13 means household energy consumption would go up $41 billion. “The good news is the rule of thumb may have temporarily broken down,” he says. If consumers this quarter are spending as they did in the fourth quarter, natural gas and utilities consumption could be about $9 billion lower, LaVorgna says. In fact, he notes utilities production is off sharply in the first quarter so far, or down 16.1 percent at an annualized rate, relative to the fourth quarter. “If we hold this level throughout the current quarter, household consumption of electricity would be down another $6 billion. This means we could see about $16 billion in less natural gas and utilities consumption, effectively offsetting about half of the recent run-up in gasoline prices—assuming gasoline prices remain near $3.58,” he said in a recent note. 
LaVorgna said the peak in gasoline is typically in May, and the impact of higher prices on the economy depends on how long and how quickly they rise. While use is down for heating oil, as well, the price for that fuel is about 20 percent higher than it was at this time last year. So consumers using heating oil may not see a savings. “We’re behind on degree days by 20 percent. That’s the New York area, but it’s pretty much the northeast,” said John Kilduff of Again Capital. He said there is global competition for distilled products, like heating oil, and that drives up the price, especially since Europe has had a particularly cold winter. Natural gas prices, meanwhile, are at a decade low and could still head lower, analysts say. LaVorgna says natural gas accounts for just 13 percent of total household energy consumption, and utilities spending is much higher, at 27 percent. “This rise in gasoline is clearly something we want to watch, and does pose some risk,” said LaVorgna. “I think of all the things in the world now gas isn’t the worst thing if the economy is getting better, which I think it is, and if Europe stabilizes, which I think it is.” Follow Patti Domm on Twitter: @pattidommQuestions? Comments? Email us atdocument.write("");document.write("marketinsider"+"@"+"cnbc.com");document.write(''); ![]()
Deutsche Bank chief U.S. economist Joseph LaVorgna crunched the numbers and says consumers may have seen about a third of the recent rise in gasoline prices offset by cheaper natural gas and lower utilities costs this winter. “To me it’s really more of a usage story than a price story,” said LaVorgna. “The savings is going to be disproportionate to the people that live in the northeast...for those people that it’s impacting, it does add up to lots of dollars.” Gasoline prices, however, are expected to continue to rise into the spring and are expected by analysts to top out above $4 a gallon, and the benefit from cheaper heating bills will also fade as the spring approaches. Economists are concerned that the consumer will start pulling back on other spending as gasoline nears $4 a gallon, a level it’s already reached in some areas. Certainly, as prices rise consumers also cut back on spending on gasoline, a bigger trend that has been in place over the past year. Last week alone, demand for gasoline dropped 6.4 percent from last year’s level. From the recent low in the week of Dec. 19, gasoline prices have risen by 29 cents to an average of $3.58 per gallon, during the week of Feb. 13. Oil prices have risen about 40 percent from their October low of around $75. West Texas intermediate was trading above $105 Wednesday on Nymex as tension surrounding Iran keeps prices high. “Our standard rule of thumb is that a one-cent increase in gasoline prices increases household energy consumption by approximately $1.4 billion,” notes LaVorgna. So, the recent price jump from December through the week of Feb. 13 means household energy consumption would go up $41 billion. “The good news is the rule of thumb may have temporarily broken down,” he says. If consumers this quarter are spending as they did in the fourth quarter, natural gas and utilities consumption could be about $9 billion lower, LaVorgna says. In fact, he notes utilities production is off sharply in the first quarter so far, or down 16.1 percent at an annualized rate, relative to the fourth quarter. “If we hold this level throughout the current quarter, household consumption of electricity would be down another $6 billion. This means we could see about $16 billion in less natural gas and utilities consumption, effectively offsetting about half of the recent run-up in gasoline prices—assuming gasoline prices remain near $3.58,” he said in a recent note. LaVorgna said the peak in gasoline is typically in May, and the impact of higher prices on the economy depends on how long and how quickly they rise. While use is down for heating oil, as well, the price for that fuel is about 20 percent higher than it was at this time last year. So consumers using heating oil may not see a savings. “We’re behind on degree days by 20 percent. That’s the New York area, but it’s pretty much the northeast,” said John Kilduff of Again Capital. He said there is global competition for distilled products, like heating oil, and that drives up the price, especially since Europe has had a particularly cold winter. Natural gas prices, meanwhile, are at a decade low and could still head lower, analysts say. LaVorgna says natural gas accounts for just 13 percent of total household energy consumption, and utilities spending is much higher, at 27 percent. “This rise in gasoline is clearly something we want to watch, and does pose some risk,” said LaVorgna. “I think of all the things in the world now gas isn’t the worst thing if the economy is getting better, which I think it is, and if Europe stabilizes, which I think it is.” Follow Patti Domm on Twitter: @pattidommQuestions? Comments? Email us atdocument.write("");document.write("marketinsider"+"@"+"cnbc.com");document.write(''); Wednesday, February 22, 2012
Iran Fuels Oil-Price Rally—And Prices Could Keep Rising
Rising tensions around Iran’s nuclear program, coupled with prospects for a better global economy, carried oil prices above $106 Tuesday for the first time since May. 
Ebrahim Noroozi | AFP | Getty ImagesIranian Navy boats take part in maneuvers in the Strait of Hormuz.Analysts say oil could continue to rise, but how much depends on a variety of factors, including whether the sanctions against Iran result in supply shortages, which are as yet not a concern. The April contract for West Texas intermediate [CLCV1 Loading... () ] was above $106 in late trading, and Brent crude [LCOJ2 Loading... () ] , the international oil benchmark, was above $121 per barrel. China’s announcement over the weekend that it would reduce reserve requirements for banks in a bid to spur lending gave a boost to risk assets, including oil, as investors see a new round of easier policy. Also helping was the euro zone agreement to fund another bailout for Greece, removing the potential of a Greek default for now. At the same time, Iran this past weekend said it would cut off oil supplies to France and Britain. The two countries were already cutting back, and Europe has vowed to end all existing supply contracts by July. The European embargo prohibits any new contracts with Iran. “The oil market has been balancing downside demand risk from Europe against downside supply risk from Iran. The Greek deal over the weekend eased some of the demand-side fears while saber rattling from Tehran has kept supply-side concerns front and center. And oil prices have surged as a result,” notes Trevor Houser, partner with the Rhodium Group. Rising oil prices also run the risk of bringing about their own decline. Analysts say at about $4 a gallon, consumers will cut back as much as possible on gasoline purchases. Gasoline use has been in decline, and was already down a surprising 8 percent last week. The national average for unleaded regular Tuesday was $3.57 per gallon, according to AAA, and analysts expect to see gasoline at $4 and some even see $5, heading into the summer driving season.Even without Iran, Houser said he has been expecting higher oil prices as Europe moves past Greece and China’s economy outperforms some reduced expectations. “We’re more bullish on the euro zone and Chinese growth and have been for the past six months, and we see higher oil prices even in the absence of Iran,” he said. The question, however, is whether gasoline prices spike to a point where they wound the consumer. “At $4 a gallon is really where you see demand take a hit. The big concern is whether a nascent U.S. recovery is kneecapped in the summer by gasoline prices,” Houser said. But with Iran as an unknown, the oil market has been rising, and traders have been betting prices will be even higher as the year goes on. “It looks as if the market has broken out pretty strongly here,” said Gene McGillian, analyst with Tradition Energy. “You have to immediately think, if things keep dovetailing on the positive side, we could push to the area where we topped out last year — at around $114,” said McGillian. He said there could first be resistance at about $110 per barrel. “I know there seems to be some supply concerns after Tehran said they going to stop selling the British and French, but I don’t think they were selling too much there anyway,” said McGillian. John Kilduff of Again Capital said the market is factoring bigger increases into the second half of the year. “You’re seeing anywhere from $125 to $200, but mostly it’s clustered around $125 to $150 (per barrel) in the calls,” he said. “There could be another leg higher for crude. It depends on what happens with the IAEA inspectors. If they leave in any kind of diplomatic huff that would be good for several dollars higher,”John Kilduff
Founding Partner, Again CapitalAnother factor traders are watching is the visit to Iran by representatives of the International Atomic Energy Agency, planned for Tuesday.“There could be another leg higher for crude. It depends on what happens with the IAEA inspectors. If they leave in any kind of diplomatic huff that would be good for several dollars higher,” Kilduff said. It was an IAEA report in November that was the catalyst for the latest round of Western governments’ sanctions. The report suggested Iran’s nuclear program was weapons oriented. Adding to the tensions around Iran is rising speculation that Israel will take action on its own to stop Iran’s nuclear program. Gen. Martin Dempsey, chairman of the U.S. Joint Chiefs, said this weekend that such an air strike by Israel was “not prudent” and would be “destabilizing.” The U.S. has also warned Iran about its threats to close the Strait of Hormuz, a shipping route that carries about 20 percent of the world’s oil. McGillian said, when it comes to Iran, the question is how much more oil can Saudi Arabia add to the market. “The Saudis have been reassuring the market they have spare capacity they can bring on line. I think that’s what people are watching for. Is there spare supply from Saudi Arabia?” he said. Under the U.S. sanctions, financial institutions that deal with the Iranian central bank would be prohibited from dealing with the U.S. financial system. That would impact Japan and Korea, which traders believe are already finding other sources. Analysts said a big unknown is what India and China might ultimately do about importing Iranian crude. “You’ve got players like India and China taking a wait and see approach about making a decision on whether to increase Iranian supply,” said Houser. Follow Patti Domm on Twitter: @pattidommQuestions? Comments? Email us atdocument.write("");document.write("marketinsider"+"@"+"cnbc.com");document.write('');![]()
Ebrahim Noroozi | AFP | Getty ImagesIranian Navy boats take part in maneuvers in the Strait of Hormuz.Analysts say oil could continue to rise, but how much depends on a variety of factors, including whether the sanctions against Iran result in supply shortages, which are as yet not a concern. The April contract for West Texas intermediate [CLCV1 Loading... () ] was above $106 in late trading, and Brent crude [LCOJ2 Loading... () ] , the international oil benchmark, was above $121 per barrel. China’s announcement over the weekend that it would reduce reserve requirements for banks in a bid to spur lending gave a boost to risk assets, including oil, as investors see a new round of easier policy. Also helping was the euro zone agreement to fund another bailout for Greece, removing the potential of a Greek default for now. At the same time, Iran this past weekend said it would cut off oil supplies to France and Britain. The two countries were already cutting back, and Europe has vowed to end all existing supply contracts by July. The European embargo prohibits any new contracts with Iran. “The oil market has been balancing downside demand risk from Europe against downside supply risk from Iran. The Greek deal over the weekend eased some of the demand-side fears while saber rattling from Tehran has kept supply-side concerns front and center. And oil prices have surged as a result,” notes Trevor Houser, partner with the Rhodium Group. Rising oil prices also run the risk of bringing about their own decline. Analysts say at about $4 a gallon, consumers will cut back as much as possible on gasoline purchases. Gasoline use has been in decline, and was already down a surprising 8 percent last week. The national average for unleaded regular Tuesday was $3.57 per gallon, according to AAA, and analysts expect to see gasoline at $4 and some even see $5, heading into the summer driving season.Even without Iran, Houser said he has been expecting higher oil prices as Europe moves past Greece and China’s economy outperforms some reduced expectations. “We’re more bullish on the euro zone and Chinese growth and have been for the past six months, and we see higher oil prices even in the absence of Iran,” he said. The question, however, is whether gasoline prices spike to a point where they wound the consumer. “At $4 a gallon is really where you see demand take a hit. The big concern is whether a nascent U.S. recovery is kneecapped in the summer by gasoline prices,” Houser said. But with Iran as an unknown, the oil market has been rising, and traders have been betting prices will be even higher as the year goes on. “It looks as if the market has broken out pretty strongly here,” said Gene McGillian, analyst with Tradition Energy. “You have to immediately think, if things keep dovetailing on the positive side, we could push to the area where we topped out last year — at around $114,” said McGillian. He said there could first be resistance at about $110 per barrel. “I know there seems to be some supply concerns after Tehran said they going to stop selling the British and French, but I don’t think they were selling too much there anyway,” said McGillian. John Kilduff of Again Capital said the market is factoring bigger increases into the second half of the year. “You’re seeing anywhere from $125 to $200, but mostly it’s clustered around $125 to $150 (per barrel) in the calls,” he said. “There could be another leg higher for crude. It depends on what happens with the IAEA inspectors. If they leave in any kind of diplomatic huff that would be good for several dollars higher,”John KilduffFounding Partner, Again CapitalAnother factor traders are watching is the visit to Iran by representatives of the International Atomic Energy Agency, planned for Tuesday.“There could be another leg higher for crude. It depends on what happens with the IAEA inspectors. If they leave in any kind of diplomatic huff that would be good for several dollars higher,” Kilduff said. It was an IAEA report in November that was the catalyst for the latest round of Western governments’ sanctions. The report suggested Iran’s nuclear program was weapons oriented. Adding to the tensions around Iran is rising speculation that Israel will take action on its own to stop Iran’s nuclear program. Gen. Martin Dempsey, chairman of the U.S. Joint Chiefs, said this weekend that such an air strike by Israel was “not prudent” and would be “destabilizing.” The U.S. has also warned Iran about its threats to close the Strait of Hormuz, a shipping route that carries about 20 percent of the world’s oil. McGillian said, when it comes to Iran, the question is how much more oil can Saudi Arabia add to the market. “The Saudis have been reassuring the market they have spare capacity they can bring on line. I think that’s what people are watching for. Is there spare supply from Saudi Arabia?” he said. Under the U.S. sanctions, financial institutions that deal with the Iranian central bank would be prohibited from dealing with the U.S. financial system. That would impact Japan and Korea, which traders believe are already finding other sources. Analysts said a big unknown is what India and China might ultimately do about importing Iranian crude. “You’ve got players like India and China taking a wait and see approach about making a decision on whether to increase Iranian supply,” said Houser. Follow Patti Domm on Twitter: @pattidommQuestions? Comments? Email us atdocument.write("");document.write("marketinsider"+"@"+"cnbc.com");document.write('');
Tuesday, February 21, 2012
Iran Fuels Oil-Price Rally—And Prices Could Keep Rising
Rising tensions around Iran’s nuclear program, coupled with prospects for a better global economy, carried oil prices above $106 Tuesday for the first time since May. Ebrahim Noroozi | AFP | Getty ImagesIranian Navy boats take part in maneuvers in the Strait of Hormuz.Analysts say oil could continue to rise, but how much depends on a variety of factors, including whether the sanctions against Iran result in supply shortages, which are as yet not a concern. The April contract for West Texas intermediate [CLCV1 Loading... () ] was above $106 in late trading, and Brent crude [LCOJ2 Loading... () ] , the international oil benchmark, was above $121 per barrel. China’s announcement over the weekend that it would reduce reserve requirements for banks in a bid to spur lending gave a boost to risk assets, including oil, as investors see a new round of easier policy. Also helping was the euro zone agreement to fund another bailout for Greece, removing the potential of a Greek default for now. At the same time, Iran this past weekend said it would cut off oil supplies to France and Britain. The two countries were already cutting back, and Europe has vowed to end all existing supply contracts by July. The European embargo prohibits any new contracts with Iran. “The oil market has been balancing downside demand risk from Europe against downside supply risk from Iran. The Greek deal over the weekend eased some of the demand-side fears while saber rattling from Tehran has kept supply-side concerns front and center. And oil prices have surged as a result,” notes Trevor Houser, partner with the Rhodium Group. Rising oil prices also run the risk of bringing about their own decline. Analysts say at about $4 a gallon, consumers will cut back as much as possible on gasoline purchases. Gasoline use has been in decline, and was already down a surprising 8 percent last week. The national average for unleaded regular Tuesday was $3.57 per gallon, according to AAA, and analysts expect to see gasoline at $4 and some even see $5, heading into the summer driving season.Even without Iran, Houser said he has been expecting higher oil prices as Europe moves past Greece and China’s economy outperforms some reduced expectations. “We’re more bullish on the euro zone and Chinese growth and have been for the past six months, and we see higher oil prices even in the absence of Iran,” he said. The question, however, is whether gasoline prices spike to a point where they wound the consumer. “At $4 a gallon is really where you see demand take a hit. The big concern is whether a nascent U.S. recovery is kneecapped in the summer by gasoline prices,” Houser said. But with Iran as an unknown, the oil market has been rising, and traders have been betting prices will be even higher as the year goes on. “It looks as if the market has broken out pretty strongly here,” said Gene McGillian, analyst with Tradition Energy. “You have to immediately think, if things keep dovetailing on the positive side, we could push to the area where we topped out last year — at around $114,” said McGillian. He said there could first be resistance at about $110 per barrel. “I know there seems to be some supply concerns after Tehran said they going to stop selling the British and French, but I don’t think they were selling too much there anyway,” said McGillian. John Kilduff of Again Capital said the market is factoring bigger increases into the second half of the year. “You’re seeing anywhere from $125 to $200, but mostly it’s clustered around $125 to $150 (per barrel) in the calls,” he said. “There could be another leg higher for crude. It depends on what happens with the IAEA inspectors. If they leave in any kind of diplomatic huff that would be good for several dollars higher,”John Kilduff
Founding Partner, Again CapitalAnother factor traders are watching is the visit to Iran by representatives of the International Atomic Energy Agency, planned for Tuesday.“There could be another leg higher for crude. It depends on what happens with the IAEA inspectors. If they leave in any kind of diplomatic huff that would be good for several dollars higher,” Kilduff said. It was an IAEA report in November that was the catalyst for the latest round of Western governments’ sanctions. The report suggested Iran’s nuclear program was weapons oriented. Adding to the tensions around Iran is rising speculation that Israel will take action on its own to stop Iran’s nuclear program. Gen. Martin Dempsey, chairman of the U.S. Joint Chiefs, said this weekend that such an air strike by Israel was “not prudent” and would be “destabilizing.” The U.S. has also warned Iran about its threats to close the Strait of Hormuz, a shipping route that carries about 20 percent of the world’s oil. McGillian said, when it comes to Iran, the question is how much more oil can Saudi Arabia add to the market. “The Saudis have been reassuring the market they have spare capacity they can bring on line. I think that’s what people are watching for. Is there spare supply from Saudi Arabia?” he said. Under the U.S. sanctions, financial institutions that deal with the Iranian central bank would be prohibited from dealing with the U.S. financial system. That would impact Japan and Korea, which traders believe are already finding other sources. Analysts said a big unknown is what India and China might ultimately do about importing Iranian crude. “You’ve got players like India and China taking a wait and see approach about making a decision on whether to increase Iranian supply,” said Houser. Follow Patti Domm on Twitter: @pattidommQuestions? Comments? Email us atdocument.write("");document.write("marketinsider"+"@"+"cnbc.com");document.write('');![]()
Ebrahim Noroozi | AFP | Getty ImagesIranian Navy boats take part in maneuvers in the Strait of Hormuz.Analysts say oil could continue to rise, but how much depends on a variety of factors, including whether the sanctions against Iran result in supply shortages, which are as yet not a concern. The April contract for West Texas intermediate [CLCV1 Loading... () ] was above $106 in late trading, and Brent crude [LCOJ2 Loading... () ] , the international oil benchmark, was above $121 per barrel. China’s announcement over the weekend that it would reduce reserve requirements for banks in a bid to spur lending gave a boost to risk assets, including oil, as investors see a new round of easier policy. Also helping was the euro zone agreement to fund another bailout for Greece, removing the potential of a Greek default for now. At the same time, Iran this past weekend said it would cut off oil supplies to France and Britain. The two countries were already cutting back, and Europe has vowed to end all existing supply contracts by July. The European embargo prohibits any new contracts with Iran. “The oil market has been balancing downside demand risk from Europe against downside supply risk from Iran. The Greek deal over the weekend eased some of the demand-side fears while saber rattling from Tehran has kept supply-side concerns front and center. And oil prices have surged as a result,” notes Trevor Houser, partner with the Rhodium Group. Rising oil prices also run the risk of bringing about their own decline. Analysts say at about $4 a gallon, consumers will cut back as much as possible on gasoline purchases. Gasoline use has been in decline, and was already down a surprising 8 percent last week. The national average for unleaded regular Tuesday was $3.57 per gallon, according to AAA, and analysts expect to see gasoline at $4 and some even see $5, heading into the summer driving season.Even without Iran, Houser said he has been expecting higher oil prices as Europe moves past Greece and China’s economy outperforms some reduced expectations. “We’re more bullish on the euro zone and Chinese growth and have been for the past six months, and we see higher oil prices even in the absence of Iran,” he said. The question, however, is whether gasoline prices spike to a point where they wound the consumer. “At $4 a gallon is really where you see demand take a hit. The big concern is whether a nascent U.S. recovery is kneecapped in the summer by gasoline prices,” Houser said. But with Iran as an unknown, the oil market has been rising, and traders have been betting prices will be even higher as the year goes on. “It looks as if the market has broken out pretty strongly here,” said Gene McGillian, analyst with Tradition Energy. “You have to immediately think, if things keep dovetailing on the positive side, we could push to the area where we topped out last year — at around $114,” said McGillian. He said there could first be resistance at about $110 per barrel. “I know there seems to be some supply concerns after Tehran said they going to stop selling the British and French, but I don’t think they were selling too much there anyway,” said McGillian. John Kilduff of Again Capital said the market is factoring bigger increases into the second half of the year. “You’re seeing anywhere from $125 to $200, but mostly it’s clustered around $125 to $150 (per barrel) in the calls,” he said. “There could be another leg higher for crude. It depends on what happens with the IAEA inspectors. If they leave in any kind of diplomatic huff that would be good for several dollars higher,”John KilduffFounding Partner, Again CapitalAnother factor traders are watching is the visit to Iran by representatives of the International Atomic Energy Agency, planned for Tuesday.“There could be another leg higher for crude. It depends on what happens with the IAEA inspectors. If they leave in any kind of diplomatic huff that would be good for several dollars higher,” Kilduff said. It was an IAEA report in November that was the catalyst for the latest round of Western governments’ sanctions. The report suggested Iran’s nuclear program was weapons oriented. Adding to the tensions around Iran is rising speculation that Israel will take action on its own to stop Iran’s nuclear program. Gen. Martin Dempsey, chairman of the U.S. Joint Chiefs, said this weekend that such an air strike by Israel was “not prudent” and would be “destabilizing.” The U.S. has also warned Iran about its threats to close the Strait of Hormuz, a shipping route that carries about 20 percent of the world’s oil. McGillian said, when it comes to Iran, the question is how much more oil can Saudi Arabia add to the market. “The Saudis have been reassuring the market they have spare capacity they can bring on line. I think that’s what people are watching for. Is there spare supply from Saudi Arabia?” he said. Under the U.S. sanctions, financial institutions that deal with the Iranian central bank would be prohibited from dealing with the U.S. financial system. That would impact Japan and Korea, which traders believe are already finding other sources. Analysts said a big unknown is what India and China might ultimately do about importing Iranian crude. “You’ve got players like India and China taking a wait and see approach about making a decision on whether to increase Iranian supply,” said Houser. Follow Patti Domm on Twitter: @pattidommQuestions? Comments? Email us atdocument.write("");document.write("marketinsider"+"@"+"cnbc.com");document.write('');
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