Scotiabank’s Commodity Price Index snaps back

After edging down in April, a sharp correction in gold prices helped Scotiabank’s Commodity Price Index rebound in May, climbing 2.3%.

“Scotiabank’s Commodity Price Index has inched up this year and is now 1.9% above a year earlier,” says Patricia Mohr, Scotiabank’s vice president of Economics and Commodity Market Specialist. “The decline in commodity prices from the April 2011 near-term peak — just prior to the negative economic fallout from excessive euro zone sovereign debt — has narrowed to -14.2% from -19.9% in late 2012.”

Read: ETF trading tips However global commodity prices, as well as bond and equity markets, have come under renewed pressure from Ben Bernanke. The Federal Reserve Chairman has indicated a stronger U.S. economy may lead the Fed to withdraw some of its bond purchase program by late 2013, possibly ending quantitative easing by my mid-2014. A backup in longer-dated interest rates in recent weeks has triggered a stronger U.S. dollar, creating headwinds for many dollar-denominated commodity prices. A shortage of liquidity in China’s banking system also unnerved commodity markets last week.

Read: Canada vulnerable to global risks Highlights in the report include:

• China’s potash imports jumped by almost 19% from January to April 2013 to 2.67 million metric tonnes (mt) compared with 2.25 mt a year earlier. Brazilian imports have surged to 2.2 mt so far this year, up 53% year over year, with buyers taking advantage of lower potash prices and incented by still high grain prices;

Read: Sluggish Chinese growth puts commodities “on alert”: BMO

• Western Canadian Select heavy oil prices (WCS) climbed from US$69 per barrel in April to US$80.90 in May, the highest level in 15 months. West Texas Intermediate oil prices (WTI) only inched up from US$92 to US$94.80 per barrel, but the WCS discount off WTI narrowed substantially by almost US$10 to US$13.90; and
• Expansion of the Enbridge and Enterprise Partners LP Seaway Pipeline, from Cushing to Texas, from 150,000 barrels per day (b/d) earlier this year to its current operating rate of 321,000 b/d, has allowed more crude oil to flow from Cushing, Oklahoma to refineries in the western PADD III region, where international oil prices prevail. This has contributed to a partial debottlenecking of the Cushing oil hub, pulling WTI oil prices up closer to the Brent international benchmark.

Staff

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