Energy prices rose 13% in January and lifted the overall BMO Financial Group Commodity Price Index to 124.9, an increase of 5.9% for the month. The growth rate represented the strongest monthly gain since last March.

“There is no question that the driving forces behind the oil price increase have been the war premium caused by ongoing uncertainty in the Middle East and the strike-induced sharp reduction in output in Venezuela,” said Earl Sweet, assistant chief economist, BMO Financial Group. “The same gloomy international political forces also sent world investors into traditionally safe havens such as gold, which in turn lifted the Metals and Mineral Index for a second consecutive month.”

The Oil and Gas Index for January rose to 213.1, which is 13% higher than December and 92.5% higher than a year ago. Oil prices rose steadily through January and early February, reaching US$36.60/barrel on Valentine’s Day. “We believe that the war premium on oil prices amounts to as much as US$4 a barrel and prices could spike above US$50 a barrel if there is a war against Iraq,” said Sweet.

Natural gas prices have also risen due to weak output levels, a colder-than-normal winter, and a rapid draw-down in underground storage.

Prices of forest products extended their modest advance of December and rose another 1% in January. On the lumber side of the index, seasonal factors and the pullback of European suppliers from the North American market helped remove some of the excess supply that has weakened prices for the past few years.

The Agricultural Index fell 3.4% in January to 98.2. Wheat prices fell for the fourth month in a row, down 3.6%. Canola prices fell 4.4% in January, weighed down by lackluster demand.

The full BMO Financial Group January 2003 Commodity Price Index and Report is available on the bank’s website at www.bmo.com/economic