Falling oil prices weigh on Toronto stock index, loonie slips
A man looks at an electronic stock board showing Japan's Nikkei 225 index at a securities firm in Tokyo on Tuesday, May 30, 2017. (AP / Eugene Hoshiko)
Linda Nguyen, The Canadian Press
Published Wednesday, May 31, 2017 12:49AM EDT
Last Updated Wednesday, May 31, 2017 5:11PM EDT
TORONTO -- North American stock markets fell for a second day in a row Wednesday as oil prices weakened amid worries about a growing global supply glut.
In Toronto, the S&P/TSX composite index pulled back 22.44 points to 15,349.91, with energy, metals and bank stocks seeing the biggest declines.
The July crude contract dropped $1.34 to US$48.32 per barrel, its lowest settlement in more than two weeks.
"Despite many forecasts, (the oil price) is no where people thought it would be," said John Stephenson, CEO at Stephenson & Co. Capital Management.
Earlier in the year, he said, energy companies had anticipated crude prices to improve to the US$57-$60 range by the second half of 2017 if factors -- such as another output agreement -- could be reached between OPEC and its non-members.
That happened last week when the 14-member cartel and 10 other countries led by Russia agreed to continue with its reductions of 1.8 million barrels a day until March 2018. The cuts have been in place since January.
But a "negative halo effect" still looms over oil prices, as investors now question whether the limits will be enough to prop up prices, especially when competitors like U.S. shale producers continue to flood the market, said Stephenson.
The markets are also still digesting what a possible alliance between the Green Party and the NDP in B.C. will mean for the Canadian oilpatch, particularly the expansion of Kinder Morgan's (TSX:KML) Trans Mountain pipeline project.
Both parties have voiced their opposition to the Trans Mountain expansion, which would see the capacity of a pipeline running from Edmonton to Burnaby, B.C.
The pressure in oil prices hampered the Canadian dollar, which dipped 0.17 of a U.S. cent to an average price of 74.07 cents US.
South of the border, the Dow Jones industrial average lost 20.82 points to 21,008.65, the S&P 500 index shed 1.11 points to 2,411.80, and the Nasdaq composite index was down 4.67 points to 6,198.52.
In commodities, the July natural gas contract was down seven cents at US$3.07 per mmBTU, the August gold contract was up $9.70 to US$1,275.40 an ounce, and the July copper contract advanced two cents at US$2.58 a pound.