A surge in the price of oil helped the energy sector boost Canada’s main stock index Tuesday as North American stock markets regained some of the ground lost Monday.
Broad losses kicked off the week as trade tensions between the U.S. and China flared up over potential action by the U.S. on technology export and investment restrictions, but trade fears eased up Tuesday, said Craig Jerusalim, portfolio manager at CIBC Asset Management.
“The market rebounded today partially off the overreaction yesterday, and there was some downplaying of the trade concerns, and that’s clearly helped lift some of the North American equity markets,” he said. “Canada’s particularly strong on the back of higher commodity prices.”
Crude was the major commodity mover as the August crude contract closed up by US$2.45, or 3.6%, at US$70.53 due to a variety of factors.
Oil moved on strong fundamental demand, the production outage that started last week at Syncrude Canada Ltd. is finally starting to bite, and the most prevalent reason is new pressure from the Americans for its allies to stop buying Iranian oil, said Jerusalim.
“Those three things together have resulted in the oil price being up well over three per cent today, which is a big single day move,” he said.
U.S. President Donald Trump has already made major steps to disrupt Iranian oil exports with the announcement he would pull out of a nuclear deal with the country and restore sanctions, so the latest move is just added pressure, said Jerusalim.
“There was just more rhetoric and commentary coming from different sources of additional pressure,” he noted. “So, it wasn’t new news, it was just the rhetoric being ratcheted up slightly.”
The increase was enough, however, to counter negative pressure on oil after Saudi Arabia said it was planning record oil production for July of about 10.8 million barrels a day.
The rise in energy helped the S&P/TSX composite index close up by 96.13 points at 16,280.09 after losing 266.18 points a day earlier.
The S&P/TSX capped energy index was up by 2.9% on the day to lead index gains on the market.
In New York, the Dow Jones industrial average closed up by 30.31 points at 24,283.11. The S&P 500 composite index was up by 5.99 points at 2,723.06 and the Nasdaq composite index was up by 29.62 points at 7,561.63.
The Canadian dollar averaged US75.15¢, down 0.02 of a U.S. cent.
The August crude contract closed up by US$2.45 at US$70.53 a barrel and the August natural gas contract was up by one cent at US$2.93 per mmBTU.
The August gold contract ended down by US$9 to US$1,259.90 an ounce. The July copper contract was even at US$2.99 a pound and the August natural gas contract was up one cent at US$2.93 per mmBTU.