TORONTO - A sharp drop in the price of Alberta heavy crude last month has pushed down the Scotiabank commodity price index by 4.6 per cent, despite increases in the mining, forestry and agricultural sectors.
Scotiabank (TSX:BNS) says a benchmark Alberta heavy crude, known as Western Canadian Select, dropped to US$57.84 per barrel last month.
That's down nearly US$15 a barrel from November, a drop of about 20 per cent.
It's also about US$30 a barrel below the price paid for West Texas Intermediate, a more widely used North American benchmark crude.
Alberta heavy crude has long been sold at a discount to other grades because of the additional processing required to turn it into products such as gasoline.
But a shortage of pipeline and storage capacity has created a bottleneck that has resulted in an oversupply of crudes from Canada and the northern United States.
Scotiabank's report says the discount on Alberta heavy crude widened considerably last month and it's expected to grow in January and February.
"While West Texas Intermediate (WTI) oil prices edged up to US$88.25 last month, the WCS discount off WTI ballooned to US$30.41 and will climb further to US$32.84 in January and US$36.94 in February,” Scotiabank commodities specialist Patricia Mohr says in her report, issued Tuesday.
Oil is one of Canada's most important exports and a major reason for the overall economy's strength in recent years. However, dependence on the U.S. has been cited as a challenge for Canadian oil producers because of the price discounts.
Among the other commodities tracked by Scotiabank:
— the metal and minerals subindex rose 1.7 per cent in December, month-to-month.
— forest products gained 3.2 per cent
_ agricultural produce edged up 0.8 per cent.