(January 26 – 11:20 ET) – With surging natural gas and liquid propane gas prices, Scotiabank’s Commodity Price Index Report, which measures price trends in Canada’s major exports, jumped by 7.8% in December — the second largest monthly gain in almost 30 years.

In December, the All Items Index climbed 17.2% above a year earlier and now exceeds the previous peak in July 1980, when energy prices were also exceptionally strong.

“Though crude oil prices declined in December, the overall Oil and Gas Index spiked as export prices for natural gas and liquid propane gas surpassed the heights of the early 1980s and moved into record territory,” says Patricia Mohr, vice president and commodities specialist, Scotia Economics. “In December, a temporary rally in the Metal and Mineral Index and firmer agricultural prices also helped to offset a decline in the Forest Products Index.”

Scotiabank’s Oil and Gas Index soared by 25.6% during the month of December as Canadian natural gas export prices jumped to an all-time high, mirroring record prices south of the border.

“NYMEX near-by futures prices soared from an average of US$5.74 per million British thermal units in November to US$8.65 in December and touched US$9.98 in late December,” says Mohr. “The previous monthly NYMEX peak of US$3.65 occurred during the unusually cold winter of 1996.”

According to Mohr, Canada’s energy trade surplus has more than doubled since 1995. In addition to strong prices, natural gas export volumes have jumped from only 1.4 trillion cubic feet (tcf) in 1990 to 2.8 tcf in 1995 and about 3.5 tcf in 2000. “Pipeline expansion and new field developments in northeastern B.C. and offshore Nova Scotia have allowed Canadian producers to increase their share of the U.S. natural gas market to about 15.9% last year from 12.9% in 1995 and only 7.7% a decade ago,” she says.

While NYMEX natural gas prices eased back to US$7.27 in mid-January because of milder temperatures in the United States, prices are likely to average much higher this year than in 2000.
-IE Staff