TORONTO - Scotiabank's commodity specialist believes crude oil should bottom out at current depressed levels with demand set to pick up later this year.
Patricia Mohr made the comment as the November crude contract on the New York Mercantile Exchange closed up 92 cents to US$82.70 a barrel Thursday, which is down about 13 per cent in the last month, reflecting growing worries about the health of the global economy and increased American production. Prices Thursday briefly fell beneath the $80 level.
"Prices should find a bottom soon at the US$80 mark, with a seasonal improvement in demand getting underway in the fourth quarter," she said.
Scotiabank's monthly commodity price index retreated in September, pressured by a strong U.S. dollar, seasonal declines in grain and livestock prices and a dismal outlook on world economic growth, particularly in Germany and the rest of the eurozone.
The oil and gas subindex dipped 0.4 per cent.
Mohr believes that in the absence of a significant production cut by the OPEC cartel, oil prices are likely to average about US$85 a barrel in 2015.
Scotiabank expects oil prices should rebound further in 2016 "possibly to the US$90 mark, alongside stronger world growth and some slowdown in U.S. oil development."
Overall, the bank's commodity index fell 2.1 per cent month over month in September, after registering a 5.4 per cent drop in August.
Agriculture and metals and minerals showing the largest declines.
Agriculture slipped 6.2 per cent, metals and minerals fell 3.1 per cent and forest products declined 0.6 per cent.