Scotiabank’s Commodity Price Index tumbled in October to its lowest level since December 1998, which was near the end of the Asian currency crisis.

The All Items Index has plunged 20% year-over-year under the weight of a slowing global economy and expectations that the events of September 11 will further dampen near-term prospects.

“All Sub-Indices lost ground in October, with a particularly large decline in the Forest Products Index,” says Patricia Mohr, vice president and commodities specialist, Scotia Economics.

“However, base metal prices have rebounded slightly in November alongside mine production curtailments and short covering by traders and investment funds. Better-than-expected results for a number of U.S. economic indicators, including retail sales, housing starts and declining unemployment claims, have bolstered prices. While these indicators may well falter again in the opening months of 2002 – pressuring commodity prices – resource prices should bottom in the first quarter and snap back in the second half of 2002 as the U.S. economy recovers.”

The Oil and Gas Index has dropped 41.5% from the heights of a year earlier. West Texas Intermediate crude oil prices eased to just over US$22 per barrel in October before plunging to US$17.45 after OPEC’s November 14 meeting. Prices are US$19.30 today.

“The market had expected the OPEC-Ten to reduce their sales quota by 1 million to 1.5 million barrels per day in December. OPEC, however, delayed the cut until January 1 and made it contingent on non-OPEC countries also agreeing to cut by 500,000 barrels per day,” says Mohr.

Following a meeting on November 23 between Russian government and oil company officials, Russia announced that it would trim exports by 50,000 barrels per day in the fourth quarter, but will meet again around December 10 to decide on policy for 2002.

Turning to natural gas, Nymex near-by futures prices recovered from a low of US$2.24 per mmbtu in September to US$2.62 in October. Prices are currently US$2.70.

The Forest Products Index lost significant ground in October as sharply lower prices for lumber, oriented strandboard and newsprint and slight declines in fine paper prices offset a modest gain in pulp. Although U.S. housing starts only edged down in October, builders are expected to trim construction activity by early 2002.

The Metal and Mineral Index lost further ground in October as widespread weakness in base metals offset slight gains in gold, silver, uranium and sulphur.

The Agricultural Index fell sharply in October, but is only 0.2% below a year earlier. Lower cattle, hog and canola prices more than countered a slight gain in barley and largely unchanged wheat prices.