Crude prices fall on oversupply issue
TORONTO — Canada’s main stock index finished on a flat note Thursday as investors looked for some direction after a second day of falling oil prices.
The Toronto Stock Exchange’s S&P/TSX composite index pulled back 9.71 points to 15,160.42, with metals, energy and materials stocks bearing the biggest losses. The index had plunged more than 200 points a day earlier.
The Canadian dollar lost 0.43 of a U.S. cent to an average price of 75.28 cents US.
In commodities, the July crude contract fell 27 cents at US$44.46 per barrel, continuing to hover at six-month lows, while the July natural gas contract was up 12 cents at US$3.06 per mmBTU.
Investors remain jittery over the future outlook for oil prices as signs still point to a growing supply glut despite efforts by OPEC members to rein in production.
On Wednesday, the U.S. government reported that oil supplies shrank only slightly last week, and the International Energy Agency warned about increased output in non-OPEC countries like the United States.
“The root problem of all of this is an oversupply,” said Kash Pashootan, a senior vice-president and portfolio manager at First Avenue Advisory, a Raymond James company. “When you look at what OPEC has been doing to restrict supply, it’s been more than offset by new production coming out of Iran combined with the data that we’re receiving from the U.S. about rig counts.”
Pashootan, however, said he doesn’t believe oil prices will fall back down to below US$30 a barrel mark, where it sat in early 2015.
At the same time, he added, “it’s difficult to find conviction of why oil should be over US$50 a barrel in this environment.”
In other commodities, the August gold contract was down $21.30 to US$1,254.60 an ounce and the July copper contract dipped a cent at US$2.57 a pound.
On the corporate front, shares in alternative mortgage lender Home Capital Group soared nearly 13 per cent after it announced it reached two agreements to pay $30.5 million in settlements with the Ontario Securities Commission and a classaction lawsuit related to allegations of misleading disclosure. Its stock rose $1.54 to finish at $13.67.
In April, staff at the OSC alleged that three Home Capital executives broke the law in their handling of a scandal involving falsified loan applications several years ago. In 2015, the company severed ties with 45 brokers over the fraud allegations. Two of those brokers have been sanctioned by the Financial Services Commission of Ontario, while the other 43 have not.
South of the border, the Dow Jones industrial average lost 14.66 points at 21,359.90. The S&P 500 index shed 5.46 points to 2,432.46, and the Nasdaq composite index fell 29.39 points to 6,165.50, pressured by a continued pullback in technology stocks.