TORONTO – Crude prices continued to fall Tuesday as worries over a supply glut pushed oil below US$40 a barrel for the first time in more than three months.
The September crude contract for West Texas Intermediate oil fell 55 cents to settle at US$39.51 a barrel.
The last time oil settled below the US$40 threshold was on April 18, when it was US$39.78, before hitting 2016 highs in May and June when it climbed over US$50 a barrel.
“The price of oil is getting people nervous again,” said Allan Small, a senior adviser at HollisWealth.
Small said although the writing has been on the wall for some time that crude prices will remain volatile, hitting below US$40 a barrel is still “pretty big for people’s psyche.”
Oil prices have also been under pressure amid nearly two weeks of losses, as fears of a global oversupply continue to grow.
“There is just so much oil out there. We keep hearing about a glut of gasoline and refiners going at full capacity,” said Small, who doesn’t expect oil prices to climb back up above the US$60-$80 range in the near future — or even perhaps ever again.
Instead, Small anticipates crude to continue to trade in the US$35-$50 range for some time due to lower demand. Oil prices have fallen dramatically over the last two years from their highs in mid-2014, when a barrel of oil was trading at US$100.
Sagging oil prices notwithstanding, traders kicked off the month on an unfavourable note across most commodities and equity markets.
“August is expected to be a pretty negative month,” said Small, pointing to recent evidence of slowing economic growth in the U.S., Canada and Europe.
In Toronto, the energy sector weighed on the S&P/TSX composite which lost 105.73 points to 14,477.01.
The commodity-sensitive loonie also felt the impact, dipping 0.27 of a U.S. cent to 76.32 cents US.
In New York, it was also a sea of red as the Dow Jones industrial average lost 90.74 points to 18,313.77, the broader S&P 500 composite index shed 13.81 points to 2,157.03 and the Nasdaq composite declined by 46.47 points to 5,137.73.
Elsewhere in commodities, the December gold contract was up $13 at US$1,372.60 as investors fled to bullion, which is seen as a safe haven during periods of volatility.
The September copper contracts gained a penny to US$2.21 a pound, while September natural gas was down four cents at US$2.73 per mmBTU.
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Note to readers: This is a corrected story. A previous version did not specify that the Nasdaq composite declined.