Scotiabank’s Commodity Price Index advanced by 1.7% in November. That’s the third consecutive month of solid gains.

“The All Items Index has climbed 13.5% above the recession-weakened levels of a year earlier — led by a 44% gain in oil and gas, a 22% improvement in agricultural prices and a 12% increase in metals and minerals,” said Patricia Mohr, vice president and commodities specialist, Scotia Economics. “Only the Forest Products Index is down year-over-year, largely due to the impact of the Canada/U.S. softwood lumber dispute. The cyclical recovery in commodity prices should continue through 2003, though — with oil and wheat prices already at high levels – the overall advance will likely be more modest than in 2002.

“With the U.S. economy working through a ‘soft spot’, non-energy gains will likely be concentrated later in the year. However, sentiment may be buoyed by additional U.S. fiscal stimulus, likely to be announced by the Bush Administration in early 2003. Natural gas, pulp, uncoated freesheet paper, and nickel appear to have the best prospects,” said Mohr.

In November, Canadian natural gas export prices climbed over US$4 per mcf, well above US$2.85 a year earlier. “Natural gas supplies are tightening fundamentally across North America due to rapid well decline rates and this year’s sharp drop in drilling activity,” said Mohr.

West Texas Intermediate crude oil prices eased from US$28.86 per barrel in October to US$26.19 in November. In mid-December, however, prices have snapped back over US$30 alongside growing supply risks related to Venezuela and Iraq. “Global oil supply-demand conditions are currently balanced,” said Mohr.

The Forest Products Index declined in November with lower lumber, oriented strandboard and pulp prices and a slight downward adjustment in average transactions prices for newsprint and linerboard.

The Metal and Mineral Index rallied in November alongside a modest recovery in base metal prices, stronger precious metals and a surge in sulphur prices. “Gold prices soared to more than a five-year high of US$333 per ounce yesterday from US$319 in November and only US$276 in December 2001,” saiys Mohr.

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