TORONTO – North American stock markets posted solid advances Thursday despite failure by some of the world’s most powerful oil-producing nations to come to an agreement on a production cap.
In Toronto, the S&P/TSX composite index climbed 73.45 points to 14,136.99, supported by gains in nearly all sectors except health-care.
It was much of the same story in New York, as the Dow Jones industrials added 48.89 points to 17,838.56, while the broader S&P 500 gained 5.93 points to 2,105.26. The tech-heavy Nasdaq rose 19.11 points to 4,971.36.
Trading volumes were also subdued with investors in a wait-and-see mode for more clues as to whether the U.S. Federal Reserve will raise its key interest rate at its next policy-rate meeting later this month.
Meanwhile, oil prices headed higher despite failure to reach a consensus on limiting output at the latest meeting of OPEC oil ministers in Vienna.
Saudi Arabia, the group’s largest producer, and Iran, a political rival which has been ramping up production after years of sanctions, have been at an impasse over production levels.
The July contract for benchmark North American crude rose 16 cents to US$49.17 a barrel, while the Canadian dollar, which usually traces crude’s trajectory, fell 0.22 of a U.S. cent to 76.31 cents US.
“OPEC still holds the keys of power. The bottom line is they’re still responsible for a great deal of the production out there,” said Kash Pashootan, portfolio manager at First Avenue Advisory in Ottawa.
“To me, it’s reasonable and not a surprise that there’s no consensus or deal that has been reached because we’re dealing with conflicting motives from the various players in the meeting.”
Pashootan predicts the current rally in crude prices is doomed to trace back 10 to 20 per cent of recent gains because a global supply glut still exists.
“The risk here is that optimism has led to oil prices running up too much in the short term and as a result, I expect a pullback in oil prices before we go up any higher from here,” he said.
“There are supply disruptions risks priced into oil right now. Once those supply disruptions pass, we go back to a world where there is an oversupply. Although rig counts are down and supply is down year over year, it still does not justify oil at $50 or higher.”
Some of the most pressing issues affecting oil prices right now include disruptions caused by militants in Nigeria and the temporary cutback in oilsands production in the Fort McMurray, Alta., area due to the massive wildfire there.
Elsewhere in commodities, July natural gas rose two cents to US$2.40 per mmBTU, while August gold fell $2.10 to US$1,212.60 a troy ounce and July copper was unchanged at US$2.07 a pound.
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