Scotiabank’s Commodity Price Index lost ground in October, falling by a moderate 1.5% over the previous month. As of October, the All Items Index stands 16.6% above a year earlier and 32.7% above the cyclical bottom in October 2001.

“The Forest Product Index retreated, as lumber prices eased sharply from late summer highs, swamping only a limited advance in pulp and paper prices,” says Patricia Mohr, VP and commodities specialist, Scotia Economics.

“The Oil and Gas Index also edged lower in October alongside slightly lower natural gas prices. Declines in the Forest Product and Oil and Gas Indices more than countered a soaring Metal and Mineral Index and slightly firmer agricultural prices.”

According to the report, despite a mixed performance in October, commodity prices are expected to gather further strength through the first half of next year.

Scotia Economics says prospects are good for more “synchronized global growth” in 2004 — an environment normally characterized by strong commodity prices. While China has accounted for most of the demand growth for resource-based products (including oil) in 2003, stronger OECD growth should add to demand in 2004.

The Metal and Mineral Index jumped in October and should continue to perform well in 2004. Base metal prices took flight and, combined with higher uranium and sulphur prices, more than offset slightly lower gold, silver and potash prices.

West Texas Intermediate oil prices rebounded from US$28.31 per barrel in September to US$30.35 in October, following OPEC’s surprise decision to cut output by 900,000 barrels per day in November — announced at its September 24 meeting.

Oil prices have climbed further in November reaching a high of US$33.28 mid-month and averaging US$31 to date. “The ‘risk premium’ in oil prices widened again in November alongside terrorist attacks in the Persian Gulf and unrest in Nigeria,” says Mohr.

http://www.newswire.ca/en/releases/archive/November2003/27/c7049.html