A surge in energy prices propelled commodity prices into record territory in October, Bank of Montreal said today.

The BMO Financial Group Commodity Price Index had its biggest gain in 20 months in October, rising 6.6% from the previous month to a level of 168.9.

Price increases for various metals and agricultural products also contributed to the advance but were comparatively more subdued next to energy prices. Most forest product prices bucked the general trend and fell during October.

“BMO’s commodity price index has risen by 69% from its low point in July 2002,” said Earl Sweet, assistant chief economist, BMO, in a release. “Commodity markets have benefited from a powerful rally during this period, which has been sustained by strengthening economic prospects in North America and abroad, booming residential construction, and generally declining commodity inventories,” he added. Sweet noted the jump in commodity prices has contributed to the sharp rise in the Canadian dollar.

The Oil & Gas Index posted its biggest increase in more than 30 months, fuelled by steep price increases for both commodities. Natural gas prices rose in tandem with oil prices, despite the fact that underground storage reached a record-high level by the end of the month.

The Forest Products Index fell by 9.7% in October, the steepest monthly drop in more than 11 years and the second monthly decline in a row. After spending much time at lofty levels earlier this year, wood product prices have come down significantly in the last two months, as market tightness eased.

The Metals & Minerals index continued to advance with a 4.5% gain for the month. “This gain was broad-based, as metal markets were driven by strong demand in the United States and China, historically low inventories, and the continuing weakness of the U.S. dollar,” said Sweet.

After rising in September after five consecutive months of decline, the Agriculture Index rose a further 1.4% in October. The increase, owing solely to a 4.8% gain in wheat prices, left the index roughly 5% higher than one year ago.