Scotiabank’s commodity price index jumped by 4.5% month-over-month in November to a new record high, 3% above the previous peak in May 2007.

This year marks the sixth consecutive year of commodity price strength. The index measures price trends in 32 of Canada’s major exports.

The all items index advanced by 141.4% from the cyclical low in October 2001, the second most powerful expansion in the post-World War II era.

The oil & gas index led the way in November, jumping 13.4% month-over-month. West Texas Intermediate (WTI) crude oil prices, the bellwether for North America, reached an intraday Nymex trading record of US $99.29 per barrel on November 21, which sent both light and heavy crude oil skyward in Alberta. That month, the price of WTI was more than US$22 above late-summer levels.

Though relatively subdued, Canadian natural gas export prices also moved over the US$7.00 per mcf mark, in line with improving Nymex prices, lifted by record crude oil and a waning in imported Liquid Natural Gas (LNG) into the U.S.

“WTI crude oil prices are expected to remain exceptionally high and volatile in 2008, averaging US$88 – almost US$90,” says Patricia Mohr, vice-president, economics and commodity market specialist at Scotiabank.

“The OPEC-Ten at its Dec. 5 meeting decided to leave its quota unchanged for the first quarter of 2008, with the call for OPEC crude oil once again likely to exceed actual production, as was the case in the fourth quarter of 2007.”

The metal and mineral index also edged up in November. Base metal prices eased alongside concerns over a slowing U.S. economy and tighter credit controls in China, but potash and sulphur prices both climbed to record highs at the Port of Vancouver. Precious metal prices were also strong, pushed up by U.S. dollar weakness and record oil prices. With a year-over-year gain of 313%, sulphur was the best performing commodity within the Scotiabank commodity price index in late 2007.

“Potash prices will almost certainly strengthen further in early 2008,” says Mohr. “China faces much higher potash prices from Western Canada, at least US$125-150 per tonne, when its annual contract is renegotiated with Canpotex for 2008. China’s contract price, set in early 2007, is currently about US$190 less than recent business concluded by IPC, representing Russian producer Silvinit, in Southeast Asia at US$450 cfr (including the cost of freight).”

The three crops using the most potash per hectare planted are palm oil, sugar cane and corn – all benefitting from surging global interest in biofuels.

Hard coking coal prices will also outperform in early 2008. In annual contract negotiations with Japanese steel mills, Western Canadian ‘premium-grade hard coking coal’ is expected to jump from US$94 per tonne (FOB Vancouver) to US$140 for JFY 2008 beginning in April, surpassing the previous US$125 peak in JFY2005.

“The bull-run in commodities should continue through the first half of 2008. There are risks on the economic front, given the credit squeeze in the United States, linked to sub-prime mortgage losses and credit re-pricing,” says Mohr.