SOURCE: Scotiabank

Scotiabank

September 29, 2014 07:30 ET

Commodity Prices Retreat to Lowest Level of 2014: Scotiabank

TORONTO, ON--(Marketwired - September 29, 2014) - Scotiabank's Commodity Price Index lost ground in August, declining a sharp 5.4% month-over-month (m/m). According to the report, while the All Items Index remained 3.3% above the late 2013 bottom, commodity prices could well retest this low in September.

"International oil prices have lost considerable momentum, grain prices are approaching a seasonal low -- amid a second year of huge U.S. crops -- and the broad-based strength of the U.S. dollar is creating headwinds for precious metal and other dollar-denominated commodity prices," said Patricia Mohr, Vice President of Economics and Commodity Market Specialist at Scotiabank. "On a more positive note, an upward revision to U.S. GDP growth to a solid 4.6% for 2014:Q2 should lift sentiment late month, though global economic conditions remain mixed.

"Renewed jitters over China's growth prospects in September, given last month's marked slowdown in industrial activity to 6.9% year-over-year, down from 9% in July, have pared gains in base metal prices in September," added Ms. Mohr. "Nevertheless, we remain optimistic that our previous forecast of strengthening zinc and nickel prices in 2015-16, linked mostly to supply developments, will prove correct."

Other highlights from the report include:

  • Zinc prices strengthened to US$1.05 per pound in August -- the highest monthly average since July 2011. Spot uranium prices have also lifted decisively off a US$28.25 per pound low in June to US$36.50 in mid-September.
  • International oil prices have pulled back from mid-June highs, alongside an easing in market concern over geopolitical supply risks in Iraq and Libya. Rapidly rising U.S. 'light, tight' oil is also beginning to impact world supply and demand conditions. The Secretary General of the Organization of the Petroleum Exporting Countries (OPEC) has indicated that the cartel will likely cut its quota by 500,000 barrels per day (b/d) to steady market conditions when it meets on November 27 -- from 30.0 to 29.5 million b/d. This would be the first cut since the economic downturn in late 2008.
  • Record potash demand in the first-half of 2014 tested global supply capability; Canada's major producer is considering ramping up production in 2015.

Read the full Scotiabank Commodity Price Index online at: http://www.scotiabank.com/ca/en/0,,3112,00.html.

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