TORONTO—Scotiabank’s Commodity Price Index inched down by 0.4 per cent month-over-month (m/m) in July, though the pace of decline slowed from June’s sharp four per cent drop.
The All Items Index has now fallen 19.5 per cent below the near-term peak in April 2011—just prior to the advent of financial market concern over excessive European sovereign debt, resulting fiscal austerity and the accompanying European economic slowdown, with a knock-on impact on global growth.
“In recent weeks, riskier assets such as oil and equities have been buoyed by expectations of further Federal Reserve Board monetary policy easing to boost a slow U.S. economy or a major bond purchase program by the European Central Bank in support of the sovereign debt market,” Scotiabank vice-president, economics and commodity market specialist Patricia Mohr said in a statement.
Oil and gas down
Scotiabank’s Oil and Gas Index declined by 2.5 per cent m/m in July.
West Texas Intermediate (WTI) oil strengthened from a low of only $77.69 June 28 to an average of $92.69 in July, and as high as $97.26 August 22 (up 25.2 per cent).
In contrast, the price of Western Canadian Select (WCS) heavy crude oil—a blend of 25 conventional and unconventional crudes—edged down from $66.38 in June to US$64.18 in July, with the discount off WTI widening to $23.74.
According to to the financial firm, the disappointing WCS price performance may only partially be alleviated by pipeline expansion to U.S. Gulf Coast refineries, where international oil prices prevail.
Mohr said pipeline-rail access to the B.C. coast would help narrow the gap between WCS and WTI more in line with crude-quality differentials.
Outside of North America, international oil prices rallied strongly in July, as the market refocused on geopolitical tensions in the Middle East, the full imposition of a European Union (EU) embargo on Iranian oil and U.S. banking sanctions aimed at curbing financial institutions from handling Iranian oil payments.
According to Mohr, Brent crude has climbed from a low of $89.23 per barrel in late June to an average of $102.72 in July and as high as $116.90 in mid-August (up 31 per cent).
Marginal metals increase
The Metal and Mineral Sub-Index inched up by 0.2 per cent m/m in July, but remained 16.5 per cent below what it was a year earlier.
Stronger copper, lead and coking coal prices offset slight declines in other base metals, precious metals and steel-additives (cobalt and molybdenum), the report found.
The Scotiabank Forest Products Index eased back by 1.3 per cent m/m in July, as Northern Bleached Softwood Kraft (NBSK) pulp prices delivered to the U.S. fell by $20 to $880 per tonne.
While Western Spruce-Pine-Fir 2×4 lumber prices eased around the July 4 holiday in the U.S., prices have snapped back in August, with the market anticipating a further recovery in U.S. housing.
Scotiabank’s Agricultural Index rose by 3.2 per cent m/m in July, as widespread strength in grains and oil seeds, and firmer hog prices more than countered weaker cattle.
Barley prices in Lethbridge, Alta., surged to a record high of $274 per tonne, as Canadian farmers stepped up shipments to the U.S. to take advantage of record high corn prices.
Canola also remained exceptionally high in July at $658 per tonne, underpinned by near-record U.S. soybean prices and buoyant overseas demand.
Canola seed and oil has emerged as one of Canada’s top export categories to China.