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Commodity Prices Continue Upward Momentum in June, says BMO Financial Group Economic Report Higher oil prices reflect market disappointment with the slow pace of rebuilding Iraq’s oil export infrastructure and other supply pressures  


For the second straight month commodity prices advanced broadly, with gains recorded for Oil and Gas, Metals and Minerals, and Forest Products.  The BMO Financial Group Commodity Price Index rose 3.7 per cent in June to 133.7(1993=100). The BMO index has now risen four of the first six months in 2003.

“Some non-energy commodity prices – especially those for metals and minerals – are now recovering some territory lost in March and April when economic expectations were dampened by the military conflict in Iraq,” said Earl Sweet, Assistant Chief Economist, BMO Financial Group.  “Oil prices have once again strengthened on supply concerns after initially tumbling on expectations of a quick victory against Iraq and only moderate damage to the country’s oil fields.  Overall, the upward trend in commodity prices since the beginning of 2002 is still in place and our commodity price index is now almost 30 per cent higher than it was a year ago.”

The Oil and Gas Index rose 4.5 per cent in June to 223.2 (1993=100), boosted mostly by an 8.2 per cent surge in crude oil prices.  “There were a number of drivers which led to this strong spurt in oil prices,” said Sweet.  “They include continuing low inventory levels of crude oil and gasoline in the US even as the economy is poised for a comeback, as well as supply problems such as the continued slowness in the reconstruction of Iraq’s oil export infrastructure and political and labour problems affecting Nigeria’s oil production.”

Oil prices reached US$30.75/barrel in June, although BMO economists still expect prices to retreat towards their equilibrium level of US$23/barrel by September.  Natural gas prices in Alberta were more stable in the month, rising 1.9 per cent to an average of US$5.20/mmbtu.

The BMO Metals and Mineral Index rose by 0.9 per cent in June to a level 6.4 per cent higher than a year ago.  The Index for June was 110.8 (1993=100).

“Gains in metals prices were tempered in June by discouraging US labour market data and soft retail sales,” said Sweet.  “We anticipate that metal price gains will continue to be limited over the next few months due to the usual seasonal slowdown in demand during the summer, but should ramp up later in the year with the emergence of stronger global economic growth.”

Nickel prices showed solid gains in the month, increasing almost 6 per cent, with average prices rising to US$4.00lb.  Nickel continued to substantially outperform the other base metals.  Copper increased 2 per cent in June while Aluminum rose only 0.3 per cent for the month, restrained by generally weak conditions in major end-markets such as the automotive and aircraft manufacturing industries.

BMO Financial Group’s Forest Products index posted its biggest gain in more than two years, rising 5.3 percent to 99.9 (1993=100).  Gains in the Index in 2003 now total almost 13 per cent.  “Lumber and oriented strandboard prices were particularly strong this month, with gains of 16.4 per cent and 35 per cent, respectively,” said Sweet.  “Much of this upward pressure followed the announcement in June of mill shutdowns, which squeezed supply at precisely the same time as consumption entered its seasonal peak.”

Market Pulp prices were hurt by rising producer inventories and declining demand in Asia, while newsprint producers faced considerable customer resistance to continued efforts to raise their per tonne prices by US$50.

BMO Commodity Index for June 2003


June 2003 Level
(1993 = 100)

Per cent change
from month ago

Per cent change
from year ago

All Commodities 133.7 3.7 29.9
Oil & Gas 223.2 4.5 73.7
Metals & Minerals 110.8 0.9 6.4
Forest Products 99.9 5.3 9.3
Agriculture 93.7 -2.0 12.6

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