TORONTO – The Toronto stock market finished flat Thursday as the rally in oil prices subsided, while worries over how Deutsche Bank will pay a US$14-billion fine related to its mortgage-backed securities business weighed on Wall Street.
The S&P/TSX composite index climbed 23.12 points at 14,754.55, with energy companies adding on the most gains.
The Canadian dollar down 0.23 of a cent to 76.05 cents US, after having gained half a cent on Wednesday.
Crude prices climbed five per cent after the Organization of the Petroleum Exporting Countries announced that its members had agreed to cut production, in a bid to boost prices. On Wednesday, the November crude oil contract gained $2.38 to settle at $47.05 a barrel. It was the biggest single day gain since early April.
But on Thursday, those gains pulled back, with a barrel of oil adding on 78 cents to US$47.83 per barrel as investors questioned the impact and likelihood of the OPEC deal getting implemented.
“The knee-jerk reaction was to the upside,” said Allan Small, a senior adviser at HollisWealth.
“Today, reality set in that yes, it’s helped (oil prices) but it’s not enough to move the needle. There is just too much oil out in the world right now. There are a lot of low-cost producers out there, especially out in the U.S., who will continue to pump oil and continue to make money even if oil is US$40 a barrel.”
Small noted the problem with OPEC’s plan is that non-member countries, including Canada, U.S. and Russia, can swoop in and pick up the slack if their members agree to cut production. It’s also possible that the 14-member OPEC can agree to the deal now in principle but ignore it completely in action, once the details are revealed at the next official meeting in November.
“They always talk about reductions and this and that and someone always cheats,” he said. “Before you know it, they’re still producing at a record pace.”
Oil prices continue to be volatile amid of glut of global supply, largely coming from U.S. shale oil and countries like Saudi Arabia.
In the summer of 2014, crude oil sold for more than US$100 a barrel before bottoming out below US$30 a barrel this January.
OPEC has agreed to have a committee look at potentially cutting production to 32.5-million to 33-million barrels a day. At the most, the possible deal would shave off 700,000 barrels a day and would need to be agreed to by OPEC members.
In New York, major indices were all down about one per cent. The Dow Jones industrial average plunged 195.79 points at 18,143.45, the broader S&P 500 composite index declined 20.24 points to 2,151.13, and the Nasdaq composite lost 49.40 points to 5,269.15.
In other commodities, the December gold contract gained $2.30 to US$1,326 an ounce, November natural gas dipped four cents at US$2.96 per mmBTU, and December copper contracts were unchanged at $2.19 a pound.
— With files from The Associated Press
Follow @LindaNguyenTO on Twitter.