TORONTO – Energy stocks recovered slightly on Thursday, pushing North American equity markets higher despite a further slide in the price of oil.
The S&P/TSX composite index rose 79 points to close at 13,016.59, adding to a meagre 15-point gain on Wednesday after Canada’s main index tumbled more than 430 points earlier in the week.
The energy subsector added nearly 1.2 per cent despite a further slide in the price of oil, rebounding from huge losses on Monday and Tuesday that dragged down the TSX and caused the loonie to fall to levels not seen in more than a decade.
Andrew Pyle, senior adviser and portfolio manager at Scotia Wealth Management, said the pummelling oil stocks took earlier this week was disproportionate to the actual risk in the sector after OPEC said on Friday that it would no longer set an upper limit on production despite a worldwide oversupply.
“OPEC has been producing beyond their quota for a year and a half,” he said. “There was nothing new about last Friday compared to what we already knew was going on.”
Despite the recovery in energy stocks, the oil-sensitive Canadian dollar fell 0.36 of a cent to 73.36 cents U.S.
The Canadian dollar has lost more than a cent and a half against the greenback since the American Thanksgiving break, when oil traded above $43.
On Thursday, the January contract for benchmark oil lost 40 cents to US$36.76 a barrel. The price of oil has fallen from a high above $110 in July 2014 as the thirsty Chinese economy has slowed and OPEC has maintained production levels well above daily demand.
Pyle said the weakness in crude may be reaching a bottom as oil-producing countries begin to face deficits, low prices boost demand and supply falls as uneconomical sources of oil are taken off the market.
Unlike many analysts, Pyle says the oil price could begin to rebound in the near term if the American dollar loses some of its recent strength when the U.S. Federal Reserve decides to raise interest rates, as it is expected to do this month.
“Historically, when interest rates have risen the U.S. dollar has weakened,” he said. “If we have the U.S. dollar fall, maybe crude oil can find a floor in this neighbourhood.”
New York indexes also rose, following a three-day losing streak.
The Dow Jones added 82.45 points to close at 17,574.75, while the S&P 500 climbed 4.61 points to 2,052.23 and the Nasdaq rose 22.30 points to 5,045.17.
In other commodities, January natural gas gave back almost five cents to settle at US$2.015 per mmBtu and February gold fell $4.50 to US$1,072.00 an ounce.