SOURCE: Scotiabank

Scotiabank

March 29, 2016 08:00 ET

Funds Look For a Bottom In Commodity Prices: Scotiabank

TORONTO, ON--(Marketwired - March 29, 2016) -  Scotiabank's Commodity Price Index edged down in February by -0.3% m/m (-25.0% yr/yr) -- the fourth consecutive monthly decline -- but is expected to rally significantly in March. Commodity prices have rebounded across a broad front since mid-February amid some easing in concern over the outlook for China's economy and a weaker U.S. dollar.

"Equally important, hedge & investment funds appear to be looking for reasons to bid commodity prices higher, after the rout of recent years. The Scotiabank Commodity Price Index is currently at a more than a decade low," said Patricia Mohr, Vice President of Economics and Commodity Market Specialist at Scotiabank. "2016 should be a transition year for commodity prices, with the current slowdown in global capital spending in oil & gas and mining setting the stage for a strong rebound going into the next decade."

The Oil & Gas Index once more led commodity prices lower in February (-7.4% m/m,-49.7% yr/yr). A decline in 'Western Canadian Select (WCS) heavy' and 'light, sweet' oil prices at Edmonton as well as exceptionally low Canadian natural gas export prices (US$2.08 per mmbtu) more than offset stronger propane prices at Edmonton & Sarnia. However, prices will rebound significantly in March. 

Other highlights from the report include:

  • The recent upturn in oil market sentiment, lifting prices to US$40, has at its root the increasing likelihood that a 'production freeze' between OPEC and non-OPEC Russia will be cobbled out at a meeting in Doha on April 17.
  • Zinc and copper prices have also rallied significantly from 'over-sold' levels in early 2016. World supply & demand conditions for zinc are already in 'deficit', with demand above supply. Prices are likely to surge by late 2016, as 'concentrate' supplies fall to critically low levels. 
  • The Alberta Oil Sands -- New Technology will lower costs, boost competitiveness and transition projects to a lower carbon world. 

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