This is a Sucker’s Bet at the Moment
OPEC thinks we’re gullible and naïve, as I said earlier this month. Unfortunately, many traders fit the bill… with some explaining to CNBC the “selloff has been overextended.”
As tempting as it is to buy oil, now is not the time.
Jumping into oil just because it fell under to an historic low doesn’t make it a buy. There’s still too much supply on the market.
Inventories just rose 2.6 million barrels to 456.2 million barrels. Traders were looking for a drawdown on that figure.
And then there’s China.
China will cut oil consumption and worsen the global glut, as well.
Even the International Energy Agency (IEA) believes the bottom of the oil market may be ahead. Unfortunately, we still have to account for issues of oversupply, though. The ability for us to absorb extra oil has been rough.
Those in desperate search for a bottom continue to learn that the hard way.
I bring this up again because of its impact on commercial real estate, most notably in cities that depend on oil money, like Houston.
According to a new report from The Houston Chronicle:
"Analysts now predict the new normal for oil prices will be in the $40 range, something that could have an impact on Houston’s office sublease space. The new oil price reality means there is a rising amount of sublease space in Houston’s office market."
"Real estate firm CBRE says the sublease space glut is at an all-time high of 7.4 million square feet halfway through the third quarter, a 78.5 percent increase for the year. CBRE said that number will plateau at 10 million square feet by the end of the year. Yet, the firm says the sublease surge accounts for only 3.6 percent of the total market inventory."
As I’ve long said, though, keep an eye on Houston’s office space market. The second oil finds and holds a bottom, the buyers will line up.
All bad things eventually come to an end…