Canada commodity prices fall in Feb as heavy oil discount widens

27 March 2012 15:02  [Source: ICIS news]

TORONTO (ICIS)--Canadian commodity prices fell again in February, largely driven by lower prices for Canadian oil as the discount for the country’s heavy crude widened, according to a survey released on Tuesday.

Toronto-based Scotiabank said its monthly index of 32 Canadian commodity prices fell by 0.7% in  February from January – the third decline in a row.

While Brent and West Texas Intermediate (WTI) oil prices continued to climb in February, prices for both light sweet and heavy oil from western Canada fell, the bank said. 

Western Canadian heavy oil normally trades at a discount to WTI, and that discount widened in February, the bank said.

Heavy oil development in Canada’s Alberta province has been growing, but the expansion of export pipeline capacity has not kept pace, the bank said.

"There is an urgent need to tap faster growing Asian markets, where world prices prevail, and to diversify away from oversupplied US midwest refining centres," said Patricia Mohr, Scotiabank’s commodity markets specialist.

Crude oil and refined petroleum products account for 28.5% of Canada's net exports of commodities and resource-based manufactured goods – a relatively high share that underlines the importance for Canada of tapping Asian markets to export its oil, Mohr added.

Meanwhile, February’s metals and mineral prices, as well as agricultural prices, were up from January, the bank said.

The bank also noted softer pricing for Canadian exports of potash fertilizer, as buyers deferred orders in the expectation of price declines.

However, potash prices should steady as a strong rally in US soybean prices points to solid fertilizer application this spring, the bank said.   

Paul Hodges studies key influences shaping the chemical industry in his Chemicals and the Economy Blog

By: Stefan Baumgarten
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