Crude oil plunges to five-month low

TORONTO — Oil prices plunged to a fivemonth low Thursday, helping pull down the Toronto stock index by nearly one per cent, amid signals from OPEC that it won’t slash output levels any further.

The S&P/TSX composite index retreated 146.44 points to 15,396.70, with energy, metals and materials stocks being the biggest decliners.

The June crude contract dropped $2.30 at $45.52 US per barrel, its lowest level since late November.

The sell-off in oil came as Reuters reported that delegates from the Organization of the Petroleum Exporting Countries hinted that the group and other producing countries will not likely increase their output cuts when it meets at the end of the month. Citing sources familiar to the matter, the news agency reported that current production levels would likely be extended.

OPEC members began shrinking output by 1.2 million barrels a day in January, marking the first time since 2008 that the 14-member cartel has agreed to a joint reduction. Eleven other non-OPEC oil-producing countries also pledged in December to cut an additional 558,000 barrels a day, reaching an overall reduction of 1.8 million bpd.

The move helped lift oil prices higher as the global glut in crude lessened. But other non-OPEC producers, particularly the U.S., have used the shortfall as an opportunity to increase their own production.

Senior markets adviser Allan Small shrugged off the decline in the price of oil, calling it a “knee-jerk reaction” to OPEC’s decision to maintain current output levels.

“Unless OPEC is going to cut more than the U.S. can make up, it’s a moot point,” said Small, who works at HollisWealth.

Small said that unless OPEC is willing to cut another million barrels, prices are going to remain rangebound.

The lower oil brought down the Canadian dollar, which fell 0.16 of a U.S. cent to an average value of 72.76 cents US.

Other commodities were also negative, with the June natural gas contract down four cents at $3.19 per mmBTU, the June gold contract falling $19.90 at $1,228.60 an ounce, and the July copper contract losing three cents at $2.51 a pound.

In New York, stock markets were flat as the Dow Jones industrial average fell 6.43 points to 20,951.47. The S&P 500 index inched ahead 1.39 points to 2,389.52 and the Nasdaq composite index gained 2.79 points to 6,075.34.

U.S. indices registered no reaction to news that the U.S. House of Representatives passed a revised bill that would roll back much of the 2010 Affordable Care Act, also nicknamed Obamacare.

As currently written, the American Health Care Act would rework subsidies for private insurance, limit federal spending on Medicaid for low-income people, and cut taxes on upper-income individuals.