All eyes on OPEC as oil recovery runs a bit behind: Scotiabank

TORONTO, April 12, 2017 /CNW/ - The Scotiabank Commodity Price Index gained 2.2% m/m in February as industrial commodities continue to benefit from healthy demand on the back of a stronger global economic outlook, while supply-side idiosyncrasies continue to provide opportunity for differentiation. The oil market recovery remains on track but fragile, as OPEC headlines will continue to drive near-term market sentiment, especially ahead of the May 25th meeting to decide whether or not to maintain production cuts for another six months.

"We're now in the third month of OPEC production cuts and compliance within the OPEC-11 has been surprisingly strong," said Rory Johnston, Commodity Economist at Scotiabank. "We believe that the combination of high OECD inventories, still-weak upstream investment outside the U.S. and recent oil price weakness will prompt OPEC to extend their production cap through the end of the year."

Prices for North American benchmark WTI have been downgraded and are now forecast to average $53/bbl in 2017 and $56/bbl in 2018. Four key trends that will shape the oil market for the remainder of 2017 are OPEC output discipline; the pace of the U.S. shale response; non-OPEC production declines outside the continental U.S. and; the strength of consistently-underestimated global demand growth.

Non-OPEC countries outside the U.S. and Canada remain a larger but slower-moving factor in future supply. However, recent strength in Brazilian production has offset broader weakness in the rest of this "other" category. This production group will be essential to meet future supply needs and is nearly equal to OPEC in size.

Other highlights:

  • U.S. shale continues strong rebound after market was flooded by supply and prices plunged in 2014, as U.S. crude production is on track to reach growth of 1Mbpd y/y by December.
  • Copper forecasts have been upgraded to $2.50/lb in 2017 and $2.65/ln in 2018 as combination of production loss, continued supply uncertainty and potential for stronger Chinese demand are all near-term bullish for prices.
  • Aluminium prices are forecast to average $0.85/lb in 2017 and 2018 as Chinese "blue sky" policies could remove substantial amounts of supply off the market, flipping balances to moderate deficit in 2017.
  • Zinc continues to show strongest fundamentals with prices forecast to average $1.35/lb in 2017 and $1.55/lb in 2018.
  • Nickel supply received potential shock as Philippines President Duterte raised possibility of banning all domestic mining activity. Prices are now forecast to average $5.00/lb in 2017 and $5.50/lb in 2018.
  • Gold prices are likely to average $1200/oz in 2017 and $1250/oz in 2018 given a mix of mildly bearish interest rate fundamentals and a balanced risk outlook.

Read the full Scotiabank Commodity Price Index online at:

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.

About Scotiabank

Scotiabank is Canada's international bank and a leading financial services provider in North America, Latin America, the Caribbean and Central America, and Asia-Pacific. We are dedicated to helping our 23 million customers become better off through a broad range of advice, products and services, including personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets. With a team of more than 88,000 employees and assets of $887 billion (as at January 31, 2017), Scotiabank trades on the Toronto (TSX: BNS) and New York Exchanges (NYSE: BNS). For more information, please visit and follow us on Twitter @ScotiabankViews.

SOURCE Scotiabank

For further information: For media enquiries only: Sierra Catalfamo, Public, Corporate and Government Affairs, Scotiabank, (416) 933-1171,


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