TORONTO – Hints that OPEC may be prompted into action over production levels sent crude prices higher Monday as the Toronto stock market registered a solid three-digit gain.
The S&P/TSX composite index surged 106.85 points to 14,755.62, buoyed by gains in the mining and energy sectors.
The Toronto market was helped by the September crude contract, which was up $1.22 at US$43.02 per barrel after OPEC announced it will meet two months ahead of schedule.
Oil ministers from the 14-nation members of the Organization of the Petroleum Exporting Countries are set to have an “informal” gathering in Algeria in September. The move is unusual because the group rarely comes together outside of regularly scheduled meetings, leading investors to take it as a sign that OPEC is concerned about oil prices.
“There is speculation around the upcoming OPEC meeting and what that might mean for production,” said Craig Fehr, a Canadian markets strategist at Edward Jones in St. Louis.
“We had a few comments today suggesting that the bear market in oil is over, that OPEC might be doing something to stabilize prices, or even lift prices moving forward.”
But Fehr cautioned that although the signals may be there now, past OPEC meetings have resulted in no action.
“It’s a little premature to suggest that that meeting is going to mark the turnaround in the oil markets. Quite frankly, the demand story is more important from a sustained oil price increase going forward,” he said.
The cost of a barrel of oil has been generally stuck in a range between US$40-$50 a barrel for most of the past year, about half of what a barrel fetched two years ago when it was over US$100.
Fehr noted that OPEC wants to stabilize oil prices, but also doesn’t want to risk losing market share to the U.S., which has increased its shale production in recent years.
“There’s been plenty of opportunities for OPEC members to cut if they so chose to in the last year and a half,” he said. “But instead, we’ve seen them maintain production as a way to maintain market share.”
In New York, the broader S&P 500 composite index barely dipped, falling by 1.98 points to 2,180.89, while the Nasdaq composite lost 7.98 points to 5,213.14. Both indices had smashed through record-highs on Friday as the U.S. Labor Department reported that 255,000 jobs were added in July, beating out expectations.
The Dow Jones industrial average also saw a drop, retreating 14.24 points to 18,529.29.
Higher crude left little impact on the Canadian dollar, which was up 0.01 of a cent to 75.97 cents US. The loonie had dropped four-fifths of a cent on Friday after Statistics Canada reported unexpectedly weak job and trade figures.
Elsewhere in commodities, the September natural gas contract was down two cents at US$2.75 per mmBTU, December gold fell $3.10 to US$1,341.30 an ounce and September copper contracts rose a penny to US$2.16 a pound.
— With files from The Associated Press
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Note to readers: This is a corrected story. A previous version had an incorrect closing price for gold.