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Commodity Prices Stage Across the Board Gain in November, says BMO Financial Group Economics Report  


Commodity prices staged a moderate, although broad-based, rally in November moving the BMO Financial Group’s Commodity Index up 1.8 per cent to 133.9 (1993=100).

“The moderate gains for the month reinforce the Index’s lack of direction since the spring following a strong rally which began in mid 2002 but which tailed off in winter 2003,” said Earl Sweet, Assistant Chief Economist, BMO Financial Group.

In November, all commodity groups posted advances, fueled largely by positive responses to improving world economic conditions.  For the second consecutive month, the Agricultural and Metals and Minerals indexes posted the strongest gains, with Oil and Gas and Forest Products rising moderately.

The Oil and Gas Index rose 0.5 per cent in November to 198.7 (1993=100).  While energy prices remain above year-ago levels, their 12 month increase moderated to 18.9 per cent, down dramatically from a recent peak of 127 per cent in February.  “Early indicators point to a strong rebound in the energy index starting this month (December) as colder weather increases the seasonal draw on inventories of natural gas and heating oils,” said Sweet.

Crude oil prices rose 2.3 per cent in November to an average of US$30.91/barrel.  Inventories of crude oil are still tight in the United States and fell to a level 7 per cent below their five-year average for late November.

Natural gas prices continued to slide in the month as inventory draw-downs remained moderate.  U.S. benchmark Henry Hub fell to an average of US$4.46/mmbtu from US$4.63/mmbtu.  Sweet noted that “weak production of the commodity in Canada and increasing demand for natural gas in oils sands operations have narrowed the spread between western Canadian and U.S. prices.”

In November, the price of gas in Alberta fell by less than its U.S. counterpart, to US$4.19/mmbtu.   This lowered the positive spread of Henry Hub over the Alberta price to an average of US$0.35/mmbtu during the past three months from US$0.68 during the same period a year earlier.

The Metals and Minerals Index maintained its momentum in November, rising 3.8 per cent in the month to 124.2 (1993=100).   The Index is now 19.3 per cent higher than a year ago.  “A weak U.S. dollar and a stronger world economy have helped boost gold prices and have created a buoyant market for industrial metals,” said Sweet.  “This demand trend will only intensify over the next two years as global industrial production continues to rev up.”

Nickel prices moved up a robust 10 per cent over the previous month and are now 65 per cent higher than a year ago.   Healthy demand, particularly from stainless steel producers in Asia, combined with a lack of scrap metal and low inventories, should sustain higher prices over the next two years although some pullback is expected in the near term.  Copper prices also rose in November, gaining 7.4 per cent (close to 30 per cent from a year earlier), while Aluminum prices rose by a more modest 2.7 per cent for the month.

The BMO Forest Price Index increased by 1.7 per cent in November to 106.5 (1993=100), putting it 25.0 per cent higher than a year ago.   Most of the gains are attributed to rising demand for pulp and paper, while wood product prices either changed little or fell in the month.

“Market pulp prices this year have been buoyed by major buying surges from China, a demand factor which we don’t expect to continue at recent levels,” said Sweet.   “The red-hot housing market and other factors such as a strike in BC have helped hold prices at a higher level than thought sustainable.  Newsprint, by contrast, is expected to continue to rise slowly as demand increases through 2004.”

The BMO Agricultural Index was the strongest mover for the month, rising 5.2 per cent to 104.2 (1993=100).  Most commodities in this category participated in the advance, with Wheat rising the fastest at 7.1 per cent.

”Rising demand for major grains and oilseeds and low inventories relative to consumption are generally expected to push prices higher over the next year, “ said Sweet.  “Further out, prices are likely to retreat as producers respond to high prices with increased output.

BMO Commodity Index for November 2003

Nov.  2003 Level

(1993 = 100)

Per cent change

From month ago

Per cent change from year ago

All Commodities




Oil & Gas




Metals & Minerals




Forest Products








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