TORONTO - Commodity prices opened 2012 nearly two per cent lower than in December, but were still higher than a year earlier, thanks to a rise in oil prices.
Scotiabank's commodity price index released Tuesday dropped 1.7 per cent in January compared to the prior month but remained 2.5 per cent above where they stood in January 2011.
The monthly report has been rebalanced to account for a rise in the prominence of oil and gas in the Canadian commodity market, the bank said.
Oil and gas products now account for nearly one-third of Canada's net exports of commodities and resource-based manufactured goods.
Under the new model, oil and gas were actually primarily responsible for a drop in prices between December and January, though they remained higher overall compared to a year earlier.
The oil and gas price index dropped 2.9 per cent month over month. Light, sweet crude oil prices at Edmonton and Western Canadian Select heavy oil at Hardisty, Alta., inched down in January and crude prices in Western Canada dropped sharply in early February due to an unscheduled outage at a Whiting, Ind., refinery, which temporarily cut demand.
"Space on some pipelines has been apportioned for March shipments, partly reflecting inadequate export pipeline capacity to the U.S. and Asia to handle Canada's growing oil production — also leading to unusually wide discounts for both light, synthetic crude and WCS relative to WTI," said Scotiabank commodity specialist Patricia Mohr.
"World oil prices continue to climb — with Brent currently at US$126 per barrel and WTI oil at $108 — amid heightened tensions over Iran's nuclear program and the likely loss of some Iranian crude to world markets. As a result, we have upwardly revised the average price forecast in 2012 for Brent to US$125 and for WTI oil to US$110."
Metal and minerals prices fell 1.8 per cent between December and January. While base metal prices rallied in general, copper eased back to US$3.83 per pound late in the month and spot uranium prices remained low at an average US$52 per pound.
Prime Minister Stephen Harper recently announced that Canada and China have completed negotiations toward an agreement that will allow increased exports of Canadian uranium to China.
"China will represent a 'growth' market for uranium in the coming decade," the Scotiabank report said. Increased demand should amount to higher prices.
Meanwhile, the forest products index inched down 0.1 per cent in January, as pulp prices declined and offset stronger lumber prices.
The agricultural index was the only subcomponent to rise in January, up 0.7 per cent, with cattle prices up 20 per cent year-over-year to a record high.
The second-ever rebalancing of the Scotiabank index sees an increased weighting on oil and gas, which now account for 39.9 per cent, compared to a previous 16.6 per cent. The weighting of forest products was dropped to 14.7 per cent from 39.8 per cent.
The weighting for metals and minerals moved up to 30.1 per cent from 26.8 per cent, while the agricultural index was relatively unchanged at 15.3 per cent compared with 16.8 per cent.