SOURCE: Scotiabank


March 31, 2015 08:11 ET

Scotiabank Commodity Price Index Rallies in February as Oil and Gas Index Rebounds

TORONTO, ON--(Marketwired - March 31, 2015) - Scotiabank's Commodity Price Index rallied by 2.4% month-over-month (m/m) in February, after falling in January to the lowest level since early 2007. The Oil and Gas Index rebounded in February, with Alberta light and heavy crude oil prices boosted by a temporary rally in West Texas Intermediate.

"The market is skeptical that the sharp drop in U.S. oil-targeted drilling activity (-45.3% year-over-year (yr/yr) as of March 27) will curb U.S. output from the shales, which grew by a further 523,000 barrels per day during the first quarter of 2015," said Patricia Mohr, Vice President of Economics and Commodity Market Specialist at Scotiabank. "Increased rig productivity, with output from new wells up at least 20% yr/yr and faster drilling times, combined with a shift to more prolific areas and fewer vertical wells, have offset the drop in active rigs. Despite market skepticism, we believe U.S. shale oil production is on the cusp of levelling out in the second quarter of 2015.

"However, a possible nuclear deal with Iran (uncertain at the time of this press release) would complicate restoration of the oil market balance. In the absence of a nuclear deal with Iran, allowing a gradual lifting of Iranian oil exports, the global supply & demand balance for crude oil should move back into rough balance in the second half of 2015, boosting prices to US$65 by year-end. Production gains will remain concentrated in the United States and Canada, but will slow markedly. This scenario allows little room for an easing of oil sanctions and accompanying restrictions on companies doing business with Iran.

"The Forest Products Index retreated by 2.1% m/m in February to a level 6.2% below a year earlier. On a more positive note, a strong pick-up in U.S. building activity and wood products demand should be in the cards for this spring. The demand on North American sawmills will climb over 80% in 2015, a key trigger point for higher prices. Lumber prices should start to rally in April, averaging a lucrative US$355 in 2015. OSB prices will also perform well."

Other highlights from the report include:

  • Canada remains top U.S. oil supplier, accounting for 46% of U.S. oil imports. 
  • Ongoing jitters over a slower pace of GDP growth in China, combined with a holiday during China's Lunar New Year festivities, took steam out of base and ferrous metals in early 2015.
  • Miners in Canada and Latin America are benefitting from double-digit currency depreciation and low diesel costs, offsetting much of this year's weaker prices for both gold and base metals. 

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

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