Bank of Canada sees volatile Canadian oil prices hindering investment

OTTAWA (Reuters) - Uncertainty about prices for Canadian oil and bottlenecks in transporting it to market have been a key factor slowing down much-needed business investment in Canada, the Bank of Canada said on Tuesday.

The central bank's Monetary Policy Report noted a 32 percent increase in prices for Western Canada Select (WCS) since its January report, following a similarly sharp decline in late 2012.

"WCS prices are expected to remain volatile until sufficient transportation capacity is in place. This volatility adds to the uncertainty facing Canada's energy sector, which is expected to remain a factor restraining Canadian business investment," it said.

The Bank of Canada said that despite the recovery in WCS prices in recent months, some firms were reevaluating their projects.

Likewise, it said that many mining firms had shifted to lower-cost projects that pose less risk in an environment of sluggish world demand and growing world supply.

(Reporting by Randall Palmer; Editing by Louise Egan)

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