TORONTO – The price of oil plunged to its lowest level in more than 10 months Wednesday, but the weakness wasn’t enough to drag down Canada’s largest stock index.
The Toronto Stock Exchange’s S&P/TSX composite index finished the session flat, dipping 1.07 points to 15,148.53, as gains in gold and materials stocks offset losses in energy and bank stocks.
The August crude contract lost 98 cents at US$42.53 per barrel, its lowest level since August of 2016.
The pullback was tempered somewhat following the release of a weekly report showing that U.S. crude inventories fell 2.5 million barrels last week, which was more than expected.
But the long-term pressure on oil, which has declined for three straight sessions, remains, says Kathryn Del Greco, an investment adviser with TD Wealth.
“The overriding theme is OPEC and its inability… to cut enough production,” she said.
In January, the Organization of the Petroleum Exporting Countries and 10 other oil-producing countries began to decrease production to combat a growing global supply glut and to push the market up. Last week, the two groups agreed to extend the cuts by nine months until next March.
While Russia, Saudi Arabia and other nations involved in the deal have met their targeted cuts, an unforeseen increase in U.S. supply has countered these efforts.
Del Greco added that other countries such as Nigeria and Libya should also be shouldering the blame for increasing their production while other players have made attempts to slow down.
Although many analysts still anticipate that the price for a barrel of crude could get back up to US$60 by the end of the year, Del Greco said some may start revising that to the downside if oil prices continue to free fall.
Also on Wednesday, Saudi Arabia, the world’s largest oil producer, announced the appointment of Saudi Crown Prince Mohammed bin Salman, a man famous for his combative political and economic policies against fellow OPEC member Iran.
Analysts caution that his appointment could bring uncertainty to the future of OPEC’s supply-cutting plan. Currently, Iran is one of three OPEC countries that have not been asked to cut oil production.
On the corporate front, Sears Canada’s stock dove 22.5 per cent following a report by Bloomberg that it’s preparing to seek court protection from creditors.
The shares (TSX:SCC) lost 18 cents to 62 cents on the TSX.
The struggling retailer’s stock has been on a nosedive in the last year, losing more than 80 per cent of its value. And just last week the company warned there was “significant doubt” about its future, saying that it could be sold or restructured.
South of the border, the Dow Jones industrial average lost 57.11 points to 21,410.03 and the S&P 500 index was down 1.42 points to 2,435.61. The Nasdaq composite index gained 45.92 points to 6,233.95.
In currencies, the Canadian dollar pulled back 0.24 of a U.S. cent to an average price of 75.13 cents US.
Elsewhere in commodities, the August gold contract finished ahead by $2.30 to US$1,245.80 an ounce, July copper was up five cents at US$2.60 a pound, and July natural gas gave back a penny at US$2.89 per mmBTU.
— With files from The Associated Press
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