The oil and gas sector has helped drag the Bank of Montreal Commodity Price Index to its lowest level since February, 1999, say the bank’s economists.

The October index dropped 4.7% to 98.4, marking the eighth time in the past ten months that the index has fallen. In October, all major commodity groups, with the exception of agriculture, continued their downward trajectory. The bank’s commodity index has now dropped 26.4% from a year ago with the oil and gas index leading the fall with a year-to-year decline of 45.6%.

Crude oil prices have now dropped from a high of close to US$35 per barrel last October to this October’s price of less than US$22 per barrel. “The increased uncertainty about near-term global economic conditions has continued to undermine commodity prices,” said Earl Sweet, associate chief economist, Bank of Montreal. “We now believe that this year’s price levels will finish below 1993 levels.”

The bank’s economists reported that the oil and gas index was battered by a 16.4% drop in the price of crude oil in October, which more than offset the concurrent 23% rise in the price of natural gas. The index registered an overall decline of 3.3%. The continued decline in crude oil prices is attributed to softening demand brought on by weak global economic conditions in general, and a sharp decline in post-Sept. 11 air travel in particular.

The metals and mineral index continued its continuing slide as it edged down 2.8% for the month, and has now fallen 14.3% since October, 2000. The bank’s economists believe that slim inventories and healthier economic conditions will lead to increased prices by the second quarter of 2002. The forest products index has fallen 14.3% from its level of a year earlier and is now lower than it has been since mid-1993. The agricultural index continued to buck the trend posting a gain of 3.2% for the month, taking it to an improved 4.8% for the year.