Commodity prices dropped 1.7% in January compared to the prior month but remained 2.5% above where they stood a year earlier, thanks to a steady rise in the price of oil, according to Scotiabank’s commodity price index.

The monthly report has been rebalanced to account for a rise in the prominence of oil and gas in the Canadian commodity market, the bank said Tuesday.

Under the new model, oil and gas were actually primarily responsible for a drop in prices between December and January, though they remained higher overall compared to a year earlier.

The oil and gas price index dropped 2.9% month over month. Light, sweet crude oil prices at Edmonton and Western Canadian Select heavy oil at Hardisty, Alta., inched down in January and crude prices in Western Canada dropped sharply in early February due to an unscheduled outage at a Whiting, Ind., refinery temporarily cut demand.

“Space on some pipelines has been apportioned for March shipments, partly reflecting inadequate export pipeline capacity to the U.S. and Asia to handle Canada’s growing oil production — also leading to unusually wide discounts for both light, synthetic crude and WCS relative to WTI,” said Scotiabank commodity specialist Patricia Mohr.

“World oil prices continue to climb — with Brent currently at US$126 per barrel and WTI oil at $108 — amid heightened tensions over Iran’s nuclear program and the likely loss of some Iranian crude to world markets. As a result, we have upwardly revised the average price forecast in 2012 for Brent to US$125 and for WTI oil to US$110.”

Metal and minerals prices fell 1.8% between December and January. While base metal prices rallied in general, copper eased back to US$3.83 per pound late in the month and spot uranium prices remained low at an average US$52 per pound.

The second-ever rebalancing of the Scotiabank index sees an increased weighting on oil and gas, which now account for 39.9%, compared to a previous 16.6%. The weighting of forest products was dropped to 14.7% from 39.8%.

The weighting for metals and minerals moved up to 30.1% from 26.8%, while the agricultural index was relatively unchanged at 15.3% compared with 16.8%.