Canada commodity prices fell in May on lower oil, China slowdown

28 June 2011 19:02  [Source: ICIS news]

TORONTO (ICIS)--Canada’s commodity prices fell by 2.6% in May from April, because of lower oil and gas prices and a mild slowdown in China's growth, a bank economist said on Tuesday.

Patricia Mohr, senior vice president of economics at Toronto-based Scotiabank, said May’s “modest” decline in the bank’s monthly commodity price index had been expected.

Declines in oil, gas and metals were only partially offset by a slight increase in agricultural commodity prices, she said.

Potash prices continue to strengthen, with high grain and oil seed prices incenting strong fertilizer application in Brazil and southeast Asia,” Mohr said.

Mohr said physical supplies of corn (maize) are low globally and corn prices could move up “quite high, depending upon how the US corn crop actually does”.

As for the near-term oil price outlook, Mohr said prices fell in the wake of the International Energy Agency’s (IEA) decision to release 60m bbl of strategic oil stocks, over 30 days - a move that would dampen prices and provide stimulus to the slowing US economy.

Longer-term, Canada needs to do more to open up fast-growing Asian markets to oil from western Canada as it is too risky to rely only on the US as an export market, Mohr said.

“If we did have more export capability into Asia, we would boost up the returns from our oil sales and really ensure world prices,” she said.

Mohr said West Texas Intermediate (WTI), a lighter crude than Brent, is currently trading at a $15/bbl discount to Brent, partly because of the build-up of Canadian shipments to the Cushing oil hub in Oklahoma, which is the pricing point for the NYMEX WTI contract.

That discount could fall once Cushing is linked up to planned pipelines to US Gulf coast refining centres, she added. 

Read Paul Hodges’ Chemicals and the Economy Blog


By: Stefan Baumgarten
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