Scotiabank’s Commodity Price Index plunged in January by 8.6% month-over-month, or -27.9% year-over-year.

That means it’s dropped below levels recorded in April 2009, and commodity prices are now at levels last seen in January 2007.

“While global economic conditions are better than in 2009, an extended period of sub-par world GDP growth has triggered intensely competitive global markets [and] taken the steam out of commodity prices,” says Patricia Mohr, vice-president of Economics, and commodity market specialist at Scotiabank.

Read: Demand for oil will drop in Q2

“A fight for market share is currently underway in oil and iron ore,” she adds. “The recent spike in the U.S. dollar trade-weighted has also been deflationary, with some commodity prices actually dragged lower in dollar terms.”

On the upside, Mohr notes, “Canada’s oil sector, West Texas Intermediate (WTI) and Brent oil prices rallied back […] in mid-February. [That] reflects a sharp drop in U.S. oil-targeted drilling (-28.5% year over year, as of February 20), combined with an expected 30% plunge in global exploration and project spending in 2015.”

Read: Oil prices boosted by OPEC predictions

She predicts these developments “will [help] restore balance in world oil markets in the second half of 2015. The net result is WTI oil prices should average US$55 to US$60 in 2015, and US$65 to $US70 in 2016.”

Regarding base metals, the index finds zinc is holding up the best at US$0.93 per pound, even though prices have edged down from US$0.985 since December. A pickup in Chinese material demand is expected.


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