(November 27 – 12:40 ET) – The Bank of Nova Scotia’s Commodity Price Index report, which measures price trends in Canada’s major exports, eased by 1.7% in October, after surging 5.4% in September. The All Items Index remains 12.3% above a year earlier.

“October declines in the Metal and Mineral, Forest Products and Agricultural Indices more than offset a further gain in the Oil and Gas Index,” said Patricia Mohr, vice president and commodities specialist, Scotia Economics. “A similar pattern is expected in November, with softness in non-energy products countering strength in oil and gas.”

Natural gas prices at the Henry Hub in Louisiana — a bellwether — have jumped to a record US$6.30 per million btus (British thermal units) in late November — almost 2.5 times year-earlier levels of only US$2.54.

“Natural gas is the fuel of choice for new power generation in the United States. While overall consumption has advanced by 2.5% through October, U.S. production has been flat-to-down,” Mohr said. “Alberta output has also changed little in 2000, despite the record number of wells drilled. Development continues to be concentrated in the shallow gas fields of southeastern Alberta where decline rates are high.”

In addition to rapid decline rates in many “conventional” producing areas, record natural gas prices across North America also reflect reduced prospects for major discoveries in the Western Canadian Sedimentary Basin and the shallow waters of the U.S. Gulf of Mexico. Exploration will increasingly shift to frontier areas.
-IE Staff