February 5 2015 – Market Update
Red Deer January sales are down from the same period last year, something we certainly expected considering the current situation with the oil prices. We did start the year with low inventory levels and while they are up some, we are still very close to a balanced market. The good news is, we are starting off this month with a better than average number of pending sales, which should translate into a good February.
The media is mostly full of doom and gloom about our economy, but there are a few positive tidbits mixed in if you look for them. Oil prices rebounded a little this week and the dollar with it. Oil futures for May are trading at much higher prices than we are currently seeing. And the news that oil companies are shutting down drilling means the production will slow. The price of oil is driven by supply and demand. When the price goes down, demand will increase in supply will decrease. As demand increases and supply decreases, price will find its balance. In the past, OPEC has artificially managed supply to keep prices high, but it appears they are willing to do that anymore. The imbalance is currently only about one – 1.5% of total consumption. It won’t require much increase in demand or decrease of supply to bring the market back in the balance.
