TORONTO, July 31, 2018 /CNW/ - A new report
from Rory Johnston, Scotiabank
Economist, published today shows that ongoing U.S.-led trade
disputes and the threat of a broader trade war that could decrease
demand for raw materials led to falling commodity prices through
June and July.
The (London Metal Exchange) LME index of six key industrial
metals fell by nearly a fifth between early-June and mid-July in
its steepest selloff since late-2011, and Brent crude time spreads
have begun to indicate at least temporarily looser supply
conditions
"While the likelihood that creeping US protectionism spins out
into a broader trade war has unfortunately moved from tail risk to
plausible scenario, we believe that cooler heads will ultimately
prevail, that the world economy will be spared the worst of
mercantilism's potential casualties, and that commodity prices will
rebound through summer's end," said Rory Johnston, Commodity
Economist at Scotiabank
Other highlights of the July 31
Scotiabank Commodity Price Index include:
- Capricious macro sentiment that pushed copper prices to
unsustainably high levels of $3.30/lb
in early June had pulled copper contracts to unjustifiably low
levels of $2.70/lb by mid-July. The
rest of the metals complex has followed a similar pattern.
- Speculative sentiment in metals contracts has become
overwhelmingly bearish, tipping near-term price risks to the upside
as positioning normalizes from exaggerated levels.
- West Texas Intermediate (WTI) rapidly closed the gap against
Brent following news of an outage at Canada's Syncrude oil sands facility in
late-June, tightening US mid-continent oil balances and temporarily
pushing WTI contracts into acute backwardation just as supply
conditions appeared to be easing throughout the rest of the
world.
Scotiabank Economics provides in-depth commentary on economic,
financial market, and policy developments, both domestically and
internationally.
Read the full Scotiabank Commodity Price Index online here.
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SOURCE Scotiabank