Commodity Prices Lose Ground in September: Scotiabank

TORONTO, ON --(Marketwired - October 16, 2014) - Scotiabank's Commodity Price Index retreated further in September, declining 2.1% month-over-month (m/m), but stayed above the late 2013 low.

"All sub-indices declined, pressured by downward revisions in world economic growth, seasonal declines in grain and livestock prices and headwinds for dollar-denominated commodity prices from broad based U.S. dollar strength," said Patricia Mohr, Vice President of Economics and Commodity Market Specialist at Scotiabank. "The rapid development of U.S. light, tight oil, in only a slowly growing world economy, contributed to softer international oil prices.

"The Oil and Gas Index edged down by 0.4% m/m to a level 9.5% below a year earlier," added Ms. Mohr. "Lower light, sweet crude oil prices in Edmonton just offset a slight gain in Western Canadian Select (WCS) heavy oil, strong propane prices and firmer Canadian natural gas export prices."

Other highlights from the report include:

--  The recent plunge in West Texas Intermediate (WTI) and Brent oil prices
    reflects weak petroleum demand in an environment of more-than-ample
    supplies. Equally important, traders are concerned that Saudi Arabia may
    not cut output to shore up prices, but instead defend its market share
    by allowing prices to drop to levels curbing U.S. oil development. In
    the absence of a significant OPEC production cut, WTI oil prices are
    likely to average about US$85 per barrel in 2015 and Brent US$87. WTI
    prices should find a bottom soon at the US$80 mark, with a seasonal
    improvement in demand getting underway in the fourth quarter.
--  The relative strength of Canadian heavy oil prices mirrors the
    configuration of many U.S. refineries, requiring heavy crude. While U.S.
    light, tight oil from North Dakota's Bakken and the Permian and Eagle
    Ford Basins in Texas has backed out imports of light, sweet crude from
    Nigeria and North Africa, U.S. imports of heavier crudes continue to
    climb.
--  Saudi Arabia accounts for 40% of OPEC supplies and is the world's
    lowest-cost major producer. OPEC will meet on November 27 to consider
    its supply policy and may yet cut production, though we believe that a
    large reduction of about one million barrels of oil per day (mb/d) is
    needed to steady prices.

Read the full Scotiabank Commodity Price Index online 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 financial services provider in over 55 countries and Canada's most international bank. Through our team of more than 86,000 employees, Scotiabank and its affiliates offer a broad range of products and services, including personal and commercial banking, wealth management, corporate and investment banking to over 21 million customers. With assets of $792 billion (as at July 31, 2014), Scotiabank trades on the Toronto BNS and New York BNS Exchanges. Scotiabank distributes the Bank's media releases using Marketwired. For more information please visit www.scotiabank.com.


FOR FURTHER INFORMATION PLEASE CONTACT:

For more information please contact:

Patricia Mohr
Scotiabank Economics
(416) 866-4210
patricia.mohr@scotiabank.com

or

Devinder Lamsar
Scotiabank Media Communications
(416) 933-1171
devinder.lamsar@scotiabank.com