Funds Look For a Bottom In Commodity Prices: Scotiabank

TORONTO, ON–(Marketwired – March 29, 2016) –  Scotiabank’s Commodity Price Index edged down in February by -0.3% m/m (-25.0% yr/yr) — the fourth consecutive monthly decline — but is expected to rally significantly in March. Commodity prices have rebounded across a broad front since mid-February amid some easing in concern over the outlook for China’s economy and a weaker U.S. dollar.
“Equally important, hedge & investment funds appear to be looking for reasons to bid commodity prices higher, after the rout of recent years. The Scotiabank Commodity Price Index is currently at a more than a decade low,” said Patricia Mohr, Vice President of Economics and Commodity Market Specialist at Scotiabank. “2016 should be a transition year for commodity prices, with the current slowdown in global capital spending in oil & gas and mining setting the stage for a strong rebound going into the next decade.”
The Oil & Gas Index once more led commodity prices lower in February (-7.4% m/m,-49.7% yr/yr). A decline in ‘Western Canadian Select (WCS) heavy’ and ‘light, sweet’ oil prices at Edmonton as well as exceptionally low Canadian natural gas export prices (US$2.08 per mmbtu) more than offset stronger propane prices at Edmonton & Sarnia. However, prices will rebound significantly in March.
Other highlights from the report include:

• The recent upturn in oil market sentiment, lifting prices to US$40, has at its root the increasing likelihood that a ‘production freeze’ between OPEC and non-OPEC Russia will be cobbled out at a meeting in Doha on April 17.
• Zinc and copper prices have also rallied significantly from ‘over-sold’ levels in early 2016. World supply & demand conditions for zinc are already in ‘deficit’, with demand above supply. Prices are likely to surge by late 2016, as ‘concentrate’ supplies fall to critically low levels.
• The Alberta Oil Sands — New Technology will lower costs, boost competitiveness and transition projects to a lower carbon world.

Read the full Scotiabank Commodity Price Index online at: https://www.scotiabank.com/ca/en/0,,3112,00.html.
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