Commodities boom has room to grow: analyst

Scotiabank’s commodity price index sprinted to a new record high for the sixth consecutive month in June, and despite recent declines it is far too early to call an end to the cycle, says analyst Patricia Mohr.

“People have been calling an end to the commodities boom for the past three years,” said Ms. Mohr, commodity market specialist at Scotiabank. “I’m not in that camp.”
Oil prices have led July’s commodity decline, falling sharply in recent weeks from its July 3 high of $147.86 U.S. to $121.65 in midday trade Tuesday.

Nevertheless, it was the oil and gas index that led the way up in June, said Ms. Mohr, and while prices may soften in months ahead, tight supplies will keep crude above $100 a barrel.

Recent declines in energy equities in the face of such fundamentals mean “Canadian oil and gas stocks are probably heavily oversold,” she said.

“They were not discounting a price of crude over $100 in the first place and now they’re discounting even lower prices going forward, maybe about $80 at most, maybe less.”

While the market’s focus has switched from supply constraints to weakness in U.S. consumption, which Ms. Mohr predicts will drop by 2.5 to three per cent this year, global demand will still likely grow by about half a per cent.

Ottawa Citizen