Scotiabank’s Commodity Index heads down in July partly due to oil prices

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TORONTO – Scotiabank’s commodity price index edged down by 0.3 per cent on a month-over-month basis in July due to lower oil prices as supply concerns about Libya and Iraq eased.

The oil and gas sub-index was down 3.9 per cent month-over-month in July.

However, Scotiabank commodity market specialist Patricia Mohr says while traders have bid down near-term oil prices, current geopolitical developments will reduce supply over the long term.

Mohr noted that the December 2019 oil futures contract is up US$12.53 per barrel since early January when it was about US$85.

Meanwhile, Scotiabank said its metal and mineral sub index rallied 3.5 per cent in July as base metal prices jumped higher, helped by better than expected economic results in China.

Zinc prices climbed to almost US$1.05 per pound from 96 cents in June.

“Commodity funds and investors have bid up zinc prices, anticipating tightening supplies over the next three, four years — with mine supplies not keeping pace with demand growth. In our view, zinc prices will climb to US$1.25 in 2015 and a very lucrative US$1.60-1.70 in 2016,” Mohr wrote.

Mohr also expected global potash sales to rebound this year with spot potash prices edging up from US$302.50 in June to US$310 per tonne in July, after bottoming at US$295 in January.

Scotiabank’s forest products sub index was up 2.4 per cent, helped by the U.S. homebuilding market, while the agricultural sub index rose 2.1 per cent.

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