Price of oil loses nearly US$1 over 2 days, North American markets down

TORONTO – Oil continued its downward slide this week on Tuesday amid continued uncertainty around crude supply, while all major North American markets recorded losses.

December crude contracts fell to US$49.96 per barrel on Tuesday, shedding 56 cents US. Since Monday’s close, oil has lost a total of 89 cents US.

The price of oil teeters as some days deliver positive news and others negative news, said Kash Pashootan, a portfolio manager at Ottawa-based First Avenue Advisory.

On Monday, Iraq threw a wrench into OPEC’s preliminary agreement to cut oil production when the country’s oil minister said it wished to be exempt from the arrangement.

On Wednesday, the U.S. Energy Information Administration will release its weekly petroleum status report. Last week’s report showed a drop in production for the week up to Oct. 14, which contributed to high gains that day for the price of oil.

For the past six months the market has been trying to figure out what the price of oil should be in the short-term, said Pashootan, as the commodity bounces back from lows of roughly $26 a barrel earlier this year in February.

“It’s been trying to understand the supply and demand fundamentals and place a new normal for oil prices,” he said.

The commodity-sensitive loonie, meanwhile, recorded a slight gain, rising 0.20 of a U.S. cent to 74.90 cents US. It ended the day Monday at 74.70 cents US, the lowest close since March 8.

Toronto’s S&P/TSX composite index was dragged down by the energy sector, falling 52.38 points to 14,870.63.

In New York, the Dow Jones industrial average shed 53.76 points to 18,169.27, while the S&P 500 fell 8.17 points to 2,143.16. The Nasdaq composite dropped 26.43 points to 5,283.40.

Despite the day’s losses, Pashootan said that over the last few months equity markets have trended higher at a time when economic productivity has been dismal and uncertainties remain over a number of factors — including a potential interest rate hike by the U.S. central bank and oil prices.

“There’s a disconnect between economic growth and the enthusiasm in the equity markets,” he said, adding that global growth is not validating the equity market’s rise over the past year.

Pashootan attributed this rise to investors turning to equities as they look for ways to earn a return on their investments in the current low interest rate environment.

Elsewhere in commodities, December natural gas fell 17 cents to about US$3.15 per mmBTU, the December gold contract rose $9.90 to US$1,273.60 an ounce, and December copper contracts gained 4.55 cents at US$2.14 a pound.

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