After rallying in May, Scotiabank’s Commodity Price Index fell by 4.1% month-over-month in June. This was the sharpest decline since late 2012.
“The Index will be underpinned in July by a return to stronger oil prices in Western Canada and the beginning of another upswing in lumber and oriented strandboard (OSB) prices, after a sharp, seasonal inventory correction,” says Patricia Mohr, Scotiabank’s vice president of Economics and commodity market specialist. “The All Items Index remains 1.7% above a year earlier, with Oil & Gas up +17.8%, Forest Products +1.5% and Agriculture +0.1% just offsetting a -13.6% decline in Metals & Minerals.”
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Highlights in the report include:
- The advantages of TransCanada’s proposed Energy East Pipeline Project: access to less expensive and more secure domestic crude oil, allowing displacement of imports in Quebec and Atlantic Canada; improved financial viability of current refineries as well as the potential for valuable new export outlets for Western Canadian oil – to Europe and, most interestingly, to India. Refiners in India have shown interest in Alberta bitumen;
Read: Scotibank’s Commodity Price Index snaps back
- After trading well below Brent in late 2012 (-US$21.90 per barrel) and early 2013 (-US$18.27), West Texas Intermediate (WTI) oil prices surged to US$108.05 on July 19, reaching virtual parity with Brent — the international benchmark. This points to stronger prices for Western Canadian Select (WCS) heavy and light oil in Western Canada and improved financial results for producers;
- China’s State Council announced a mini-stimulus package, scrapping taxes on small businesses, reducing administrative costs for exporting companies and creating new financing vehicles for private-sector railway investment (bonds).