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Press release from CNW Group

Scotiabank's Commodity Price Index Snaps Back in May

Monday, June 24, 2013

Scotiabank's Commodity Price Index Snaps Back in May

07:00 EDT Monday, June 24, 2013
  • Potash Shipments to China and Brazil Surge
  • WCS Heavy Oil Prices Improve
  • U.S. Pipeline Developments Have Positive Implications for Canada's Oil Patch   

TORONTO, June 24, 2013 /CNW/ - After edging down in April, amid a sharp mid-month correction in gold prices, Scotiabank's Commodity Price Index rebounded sharply in May, climbing 2.3% month-over-month (m/m).

"Scotiabank's Commodity Price Index has inched up this year and is now 1.9% above a year earlier," said Patricia Mohr, Scotiabank's Vice President of Economics and Commodity Market Specialist. "The decline in commodity prices from the April 2011 near-term peak - just prior to the negative economic fallout from excessive euro zone sovereign debt - has narrowed to -14.2% from -19.9% in late 2012." 

However global commodity prices - as well as bond and equity markets - have come under renewed pressure from Ben Bernanke. The Federal Reserve Chairman has indicated that a stronger U.S. economy may lead the Fed to withdraw some of its bond purchase program by late 2013, possibly ending quantitative easing by my mid-2014. A backup in longer-dated interest rates in recent weeks has triggered a stronger U.S. dollar, creating headwinds for many dollar-denominated commodity prices. A shortage of liquidity in China's banking system also unnerved commodity markets last week.     

Highlights in the report include:

  • China's potash imports jumped by almost 19% from January to April 2013 to 2.67 million metric tonnes (mt) compared with 2.25 mt a year earlier.  Brazilian imports have surged to 2.2 mt so far this year - up 53% year over year (yr/yr) - with buyers taking advantage of lower potash prices and incented by still high grain prices.
  • Western Canadian Select heavy oil prices (WCS) climbed from US$69 per barrel in April to US$80.90 in May, the highest level in 15 months. West Texas Intermediate oil prices (WTI) only inched up from US$92 to US$94.80 per barrel, but the WCS discount off WTI narrowed substantially by almost US$10 to US$13.90.
  • Expansion of the Enbridge and Enterprise Partners LP Seaway Pipeline, from Cushing to Texas, from 150,000 barrels per day (b/d) earlier this year to its current operating rate of 321,000 b/d, has allowed more crude oil to flow from Cushing, Oklahoma to refineries in the western PADD III region, where international oil prices prevail. This has contributed to a partial debottlenecking of the Cushing oil hub, pulling WTI oil prices up closer to the Brent international benchmark.

Read the full Scotiabank Commodity Price Index 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.

Scotiabank is a leading multinational financial services provider and Canada's most international bank. With more than 83,000 employees, Scotiabank and its affiliates serve some 19 million customers in more than 55 countries around the world. Scotiabank offers a broad range of products and services including personal, commercial, corporate and investment banking. In December 2012, Scotiabank became the first Canadian bank to be named Global Bank of the Year and Bank of the Year in the Americas by The Banker magazine, a Financial Times publication. With assets of $754 billion (as at April 30, 2013), Scotiabank trades on the Toronto (BNS) and New York Exchanges (BNS). For more information please visit www.scotiabank.com. 

For high-resolution video clips visit http://media.scotiabank.com/cdaen/multimedia/mc-videos.html. For more Scotiabank economic publications visit http://www.scotiabank.com/ca/en/0,,3112,00.html. 

SOURCE: Scotiabank - Economic Reports

For further information:

Patricia Mohr, Scotiabank Economics, (416) 866-4210, patricia.mohr@scotiabank.com; or
Joe Konecny, Scotiabank Media Communications, (416) 933-1795, joe.konecny@scotiabank.com.

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