SOURCE: Scotiabank


February 18, 2016 08:00 ET

Commodity Prices Lose Ground Again in January: Scotiabank

TORONTO, ON--(Marketwired - February 18, 2016) -  Scotiabank's Commodity Price Index lost ground again in January, declining 5.1% month-over-month (m/m), pushed down by financial market volatility and heightened concern over the outlook for China and global growth. The All Items Index has now dropped 26% below the April 2009 bottom during the last recession and is lower than a decade ago.

The Oil & Gas Index once more led commodity prices lower in January (-15.9% m/m & -38.1% yr/yr). As prices approach the bottom of the world cost curve, Saudi Arabia and Russia have agreed to a tentative oil output freeze. 

"Today's battle for oil market share -- not only between Saudi Arabia and the U.S. shale producers, but also between Saudi Arabia and Iran/Iraq -- has prevented a rebalancing of excessive world supplies despite generally favourable demand prospects," said Patricia Mohr, Vice President of Economics and Commodity Market Specialist at Scotiabank. "The tentative agreement between Saudi Arabia & Russia (at the urging of Venezuela & Qatar) is a step in the right direction towards steadying world oil prices, though actual production cuts are probably needed."

Other highlights from the report include:

  1. An outline of the pre-conditions for a lasting rebound in oil prices. 
  2. A number of base metals (zinc and copper) were 'over-sold' in January, with actual supply & demand conditions better than feared. LME zinc prices have snapped back in February, with traders realizing that zinc is in a 'deficit' position (both for refined metal and concentrates). As supplies tighten, zinc prices are likely to shoot up to US$1.25 per pound by 2017.
  3. Gold has regained its lustre, climbing to a 12-month high of US$1,241 per ounce on February 11, amid equity market & currency volatility and negative interest rates adopted by some central banks. The World Gold Council reports that global output dropped in 2015:Q4, with further declines expected in 2016-17.

Read the full Scotiabank Commodity Price Index online at:,,3112,00.html.

Scotiabank provides clients with in-depth research into the factors shaping the outlook for Canada and the global economy, including macroeconomic developments, currency and capital market trends, commodity and industry performance, as well as monetary, fiscal and public policy issues.

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