A sharp decline in the price of natural gas and moderate weakness in metals sustained the slide in BMO Financial Group’s Commodity Price Index in July from its recent peak in April. The bank’s composite index of nineteen commodities important to the Canadian economy fell 2.9% to 99.7 from a downward revised 102.7 in June.

“The recovery in commodity prices earlier this year from their low point last November has been reversed, leading to a double-dip formation,” said Rick Egelton, deputy chief economist, BMO Financial Group.

The Oil & Gas Index dropped for the third consecutive month, falling 10.5% in July on the heels of an even steeper 15.1% decline in June. Prices of Metals & Minerals declined moderately in July, interrupting an eight-month rally from their low point last October. Forest Product prices, in aggregate, remained flat, with disparate trends in the various segments – wood, pulp, and paper. On the upside, the bank’s Agriculture Index shot up 10.7%.

“The plunge in Canadian natural gas prices stems from the build-up of a mini-bubble in Western Canada, as U.S. pipeline bottlenecks in the Pacific Northwest and generally weak industrial demand have caused gas to back up into Canada,” said Egelton. “Against all odds, crude oil prices have held up well, even rising in July, but the risk to oil prices is still on the downside.

“Buyers and sellers of metals have become more concerned about the strength of global industrial production,” said Egelton. The bank’s report claims that a resumption in the uptrend in metal prices will likely require renewed signs of a strengthening in North America’s economic momentum.