Commodity prices registered their fifth consecutive monthly decline on the Scotiabank Commodity Price Index, declining 2.3 per cent in April from a month earlier. The index has fallen more than 15 per cent from its near-term peak in April 2011, as slowing growth in China and economic malaise in Europe weigh on markets.
Oil and gas led the decline as the price discount on ‘Western Canadian Select’ (relative to West Texas Intermediate oil) widened to $32.81 (U.S.) a barrel, from $31.41.
Patricia Mohr, vice president, economics and commodity market specialist at Bank of Nova Scotia, called the gap “enormous” and blamed it on over-reliance on exports to the U.S. Midwest and a lack of sufficient export pipeline infrastructure from Western Canada.
But she forecasts that the gap will close this month and in June, party due to less pipeline congestion.
The metals and minerals component of the index slipped 3.1 per cent, as falling gold prices more than offset slight gains in iron ore, uranium and cobalt. Agriculture moved ahead 2 per cent, led by canola, strong barley and a pick-up in wheat.
Forestry products marked their third consecutive monthly advance, rising 1.5 per cent, assisted by mill shutdowns and exports to China.
“This capacity reduction - in the context of growing demand from China, now 25 per cent of B.C. output - will hasten the day when even a modest pick-up in U.S. housing starts permanently tightens North American supplies,” Ms. Mohr wrote.