Oil at lowest level in more than a year

TORONTO — A sharp plunge in oil prices Friday cascaded across the energy sector and into the wider market to push North American indexes into the red.

The drop of US$4.21 or 8.3 per cent in the crude price to US$50.42 — its lowest level in over a year — came after Saudi Arabia said Friday it had hit record production. The Saudi announcement added to fears in the energy market after U.S. crude inventories rose this week and indications out of Europe and elsewhere pointed to a potential slowing of global growth.

“All three of these have weighed quite dramatically on crude oil prices this week,” said Candice Bangsund, portfolio manager for Fiera Capital.

“The entire week we’ve had a lot of investor concerns regarding a renewed global supply glut in the marketplace, whether it’s Wednesday’s increase in U.S. stockpiles, which rose for the ninth consecutive week, as well as obviously ongoing concerns about global demand.”

The fall in crude prices weighed on markets in general, said Bangsund.

“That’s spilled over into the entire marketplace, so not just the energy space, but the commodity space in general, and it’s really just stoked a risk-off sentiment in the marketplace.”

The S&P/TSX composite index closed down 80.85 points at 15,010.73, led by a 4.7 per cent drop in the energy index.

The composite index traded as low as 14,900.32 on the day with about 155 million shares traded,

On a shortened trading day in New York, the Dow Jones industrial average closed down 178.74 points at 24,285.95. The S&P 500 index closed down 17.37 points at 2,6432.56, while the Nasdaq composite closed down 33.27 points at 6,938.98.

“From a technical standpoint, there’s just a lot of negativity, and investor nervousness, or markets are nervous about the crude markets and prices,” said Bangsund.

The Canadian dollar averaged 75.60 cents US, down 0.13 of a US cent from Thursday.

The loonie fell as the U.S. dollar got a boost as a safehaven, while lower energy prices outweighed positive data out of Statistics Canada, said Bangsund.

“The economic data out of Canada this morning was actually quite positive and exceeded expectations, both on retail sales and on the inflation front.”

Canada’s annual inflation rate picked up its pace last month to hit 2.4 per cent in an advance mostly fuelled by temporary factors such as higher gasoline prices and steeper airfares, compared to a year ago, Statistics Canada said Friday.

The federal agency’s October inflation number marked an increase from 2.2 per cent in September and pushed the reading a little farther away from the Bank of Canada’s ideal, two per cent target.

But analysts noted Friday that the slightly stronger inflation was likely to lose some of its momentum as the short-term factors fade and, especially, as the data start to show the effects of the recent, sharp decline in oil prices.

For now, experts such as RBC senior economist Nathan Janzen expect the Bank of Canada to stay in a holding pattern at its next interest-rate decision, scheduled for Dec. 5. With the economy running at full tilt, the central bank is on a rate-hiking path to prevent inflation from climbing too high. Market watchers are predicting governor Stephen Poloz to wait until January before his next rate increase.

The December natural gas contract ended down 12 cents at $4.36 per mmBTU. The December gold contract closed down $4.80 at US$1,223.20 an ounce and the December copper contract closed down three cents at US$2.77 a pound.