TORONTO — Slumping oil prices dragged Canada’s main stock index lower Tuesday as the price of crude fell for a seventh straight day in a row.
The Toronto Stock Exchange’s S&P/TSX composite index pulled back 165.21 points, or more than one per cent, to 15,379.61, with nearly all sectors finishing the session to the negative.
Shares of Valeant Pharmaceuticals (TSX:VRX) were also down sharply on news that one of its major investors, Bill Ackman of Pershing Square, sold all his hedge fund’s remaining stock in the company. The shares lost nearly 10 per cent, or $1.62, to $14.59.
“When you have your largest backer of the stock over the past few years now basically saying he’s totally out of it, obviously that has a big negative effect on the name,” said Allan Small, a senior adviser at Holliswealth.
The Laval, Que.-based pharmaceutical company has attempted to turn around its business amid government probes, lawsuits and criticism of its aggressive price hikes for critical heart drugs.
Former executives of Valeant and a related mail-order pharmacy were charged with a fraud-and-kickback scheme in November.
Energy stocks were also a large weight on the TSX as the April crude contract dipped 68 cents at US$47.72 per barrel amid a report from OPEC that showed Saudi Arabia pumped more than 10 million barrels of oil a day in February, reversing a third of its cuts from the previous month.
Questions have been swirling in the past few weeks over whether a production cut by the 14-member cartel, and a similar quota by a group of non-OPEC members, is enough to lift crude prices higher if other producers, namely the United States, continue to pump more to make up the difference.
In January, OPEC, which includes the world’s largest oil producer, Saudi Arabia, began to slash production by 1.2 million barrels a day for six months. Other non-OPEC members including Russia and 10 other nations also agreed to scale back production by 558,000 barrels a day for the same period.
But last week, a U.S. Department of Energy report showed that oil reserves grew by eight million barrels last week, far more than analysts anticipated.
“There is just too much of it in the world right now and I don’t think that’s going to change any time soon,” said Small.
“The OPEC cuts were doomed from the start in my opinion because I always felt the winner of this whole thing would be the United States and they would be able to ramp up production and make up the million or million plus per day barrel that OPEC was cutting.”
Small anticipates oil prices to stay range bound in the near-term, noting that he would be surprised if oil falls below US$30 a barrel or reaches US$70 a barrel again without a major trigger.
The weakness in crude pulled the Canadian dollar down by 0.22 of a U.S. cent to 74.16 cents US.
In New York, major indices dipped as the U.S. Federal Reserve kicked off a two-day policy rate meeting. The Dow Jones industrial average dropped 44.11 points to 20,837.37, the S&P 500 index lost 8.02 points to 2,365.45 and the Nasdaq composite index pulled back 18.96 points to 5,856.82.
In other commodities, the April gold contract fell 50 cents at US$1,202.60 an ounce, May copper contracts were up one cent to US$2.64 a pound and April natural gas contracts slipped 11 cents at US$2.94 per mmBTU.
— With files from The Associated Press
