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Retreat in Oil and Gas Prices Drags Down BMO Financial Group’s Commodity Index in April for Second Straight Month  


The inevitable post-Iraq-war decline in oil prices helped lower the BMO Financial Group Commodity Price Index for April by 7.6 per cent to 124.7 (1993 = 100).  This marked the Index’s second consecutive monthly loss as markets turned their attention from the Middle East back to the sluggish economic realities in the United States and other parts of the world.

“Oil and Gas, Metals and Minerals and Agricultural markets all faced weaker conditions as increased production and capacity began to outstrip demand,” said Earl Sweet, Assistant Chief Economist, BMO Financial Group.  “Prices have now declined by a cumulative 10.7 per cent since February, but this still only partially offsets the robust 40 per cent increase in the commodity price index since last summer.”

The BMO Oil and Gas Index fell a dramatic 17.1 per cent in April with both crude oil and natural gas prices posting sharp declines. The sub-index finished the month at 203.5 (1993=100).  Oil prices were pummeled by a combination of flat-out OPEC production and the cyclical seasonal drop in oil consumption.

“Although current US inventories of crude oil are at multi-year lows, which would normally indicate higher than current prices, the market is signaling concern that high output levels by Saudi Arabia and other OPEC nations could lead to a glut by the third quarter,” said Sweet.  “In fact, prices might have fallen even further if not for the steady disruptions to Nigerian oil production from civil disorder and strikes.”

While natural gas prices are also down from their winter peaks, they are still high by historical standards and are expected to remain so for the rest of the year.  “Underground natural gas storage is at rock bottom levels and production is still low, so producers are expected to have difficulty meeting demand and rebuilding inventories before next winter,” said Sweet.

The Metals and Minerals Index endured another broad-based decline in April, as gold prices retreated further following the end of the Iraq war.  The sub-index lost 3.4 per cent for the month landing at 104.5 (1993=100) for April.  Nickel prices declined 5.2 per cent to $US3.60/lb, although continued strength in demand and limited production are expected to move prices higher over the next two years.  Copper and Aluminum prices also fell for the month by 4.2 per cent and 3.7 per cent respectively.

“Given the weakness of current international markets, metals and minerals are expected to register limited price gains during the next few months and then strengthen later in the year with the emergence of stronger economic conditions,” said Sweet.

Forest product prices moved up 4 per cent in April, the only sub-index to do so for the month.  It finished the month at 94.3 (1993=100).  Although lumber prices were sluggish, market pulp and newsprint producers were able to force through price increases.  It was the third straight month of price increases for pulp producers.  “While some of the recent gains in pulp and paper prices are likely to come under pressure in the months to come, their overall near-term prospects look better than those for most wood products,” said Sweet.

The Agricultural Index continued its recent downward trend with a drop of 2.8 per cent in April, as soft demand conditions and expectations of higher production further depressed prices.  The index has declined in six of the past seven months and is now at 93.6 (1993=100).  Lower wheat prices were solely responsible for the drop in the index during the month while corn and oilseeds chalked up respectable gains.

BMO Commodity Index for April 2003


Apri1 2003 Level
(1993 = 100)

Per cent change
from month ago 

Per cent change
from year ago
All Commodities 124.7 -7.6  14.2 
Oil & Gas 203.5  -17.1  33.7
Metals & Minerals  104.5  -3.4  1.7 
Forest Products  94.3  4.0 1.6 
Agriculture  93.6  -2.8  16.8 

The full BMO Financial Group April 2003 Commodity Price Index report is available on the BMO website at