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