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Disruptions and Sentiment Drive Crude Higher While Metals Take a Breather: Scotiabank

TORONTO, ON–(Marketwired – May 27, 2016) – Scotiabank’s Commodity Price Index improved by 4.5% m/m in April as energy gains more than offset metals weakness. A range of recent high profile disruptions caused temporary shifts in price, though Scotiabank Economics does not expect the market to enter a sustainable deficit until mid-2017. Overall, a respectable showing among the grains and oilseed rounded out a good month for the prices of major Canadian export commodities.

The Oil & Gas Index advanced by 12% m/m in April as rising crude prices continue to test fresh highs. West Texas Intermediate (WTI) crude rose to $50/bbl intra-day over the past week as prices responded to a series of unplanned disruptions, including the Fort McMurray wildfires. However, Scotiabank Economics anticipates WTI averaging $42/bbl in 2016.

“Some of these disruptions can be chalked up to bad luck,” said Rory Johnston, Commodity Economist at Scotiabank. “These recent disruptions are not, in our view, a sign of an imminent rebalancing of supply and demand but they do illustrate that the road to balance will be bumpy.”

Meanwhile, the price of Canadian natural gas remains low as current inventory levels are more than 70% higher than the five-year average for this time of year. This is largely the result of a mild winter and the recent impact of the Albertan wildfires on regional demand.

The Metals & Minerals Index contracted by 0.3% m/m in April as some of the speculative fervor on Chinese commodity exchanges, detailed in last month’s report, began to dissipate. All major base metals lost ground relative to late-April/early-May highs, impacted by the easing price of iron ore, which has shed more than $20/t (almost 30%).

Other highlights from the report include:

  • Copper will likely experience continued headwinds through the summer on the back of weaker demand prospects and a sluggish supply response.
  • Zinc continues to display the strongest fundamentals within the base metals group and prices remain more than 30% higher than mid-January levels.
  • Record crude inventory levels and the impermanence of recent disruptions are blunting any material spike in prices.

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.

About Scotiabank

Scotiabank is Canada’s international bank and a leading financial services provider in North America, Latin America, the Caribbean and Central America, and Asia-Pacific. We are dedicated to helping our 23 million customers become better off through a broad range of advice, products and services, including personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets. With a team of more than 89,000 employees and assets of $920 billion (as at January 31, 2016), Scotiabank trades on the Toronto (TSX: BNS) and New York Exchanges (NYSE: BNS). Scotiabank distributes the Bank’s media releases using Marketwired. For more information, please visit www.scotiabank.com and follow us on Twitter @ScotiabankViews.

For media enquiries only:
Debra Chan
Public, Corporate and Government Affairs
(416) 866-6443
[email protected]


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