TORONTO (miningweekly.com) – Despite Scotiabank’s Commodity Price Index recording its fourth consecutive monthly decline in February, when it edged down 0.3% month-on-month and down 25% year-on-year, analysts expect the index to rally significantly in March.
According to a press release, commodity prices had rebounded across a broad front since mid-February, amid some easing following concern over the outlook for China's economy and a weaker US dollar.
"Equally important, hedge and investment funds appear to be looking for reasons to bid commodity prices higher, after the rout of recent years," said VP of economics and commodity market specialist Patricia Mohr, adding that the Scotiabank Commodity Price Index was currently at decade lows.
"[This year] should be a transition year for commodity prices, with the current slowdown in global capital spending in oil and 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, down 7.4% month-on-month and down 49.7% year-on-year. A decline in Western Canadian Select heavy, and light, sweet oil prices at Edmonton, as well as exceptionally low Canadian natural gas export prices at $2.08/MMBtu, more than offset stronger propane prices at Edmonton and Sarnia. However, prices were expected to rebound significantly in March.
Scotiabank’s Commodity Price Index report also noted that the recent upturn in oil market sentiment that had lifted prices to $40/bl, had, at its root, the increasing likelihood that a production freeze between Organisation of the Petroleum Exporting Countries (Opec) and non-Opec Russia would be thrashed out at a meeting, in Doha, on April 17.
Zinc and copper prices had also rallied significantly from oversold levels in early 2016. World supply and demand conditions for zinc were already in deficit, with demand above supply. Prices were likely to surge by late 2016, as concentrate supplies fell to critically low levels.
Meanwhile, Scotiabank expected that new technologies could lower costs in the Alberta oil sands, boost competitiveness and transition projects to a lower carbon environment.