Toronto – An eight-day winning streak for oil prices ended Wednesday amid news that Russia isn’t interested in pursuing deeper production cuts.
The August crude contract fell back $1.94 to US$45.13 per barrel, following a Bloomberg report that the influential non-OPEC member would oppose any proposal for more cuts at a meeting later this month.
One of the four unnamed Russian government officials told the news wire that further reductions suggest that OPEC and non-member countries don’t think their pact to reduce supply by 1.8 million barrels a day through to March 2018 is having the desired effect on oil prices.
While Russia, Saudi Arabia and other nations involved in the deal have met their targeted cuts, an unforeseen increase in U.S. supply have been blamed for countering these efforts.
“Oil prices are tumbling lower on this Russian news,” said Candice Bangsund, vice-president and portfolio manager at Fiera Capital in Montreal.
Energy shares weighed on Canada’s main stock index but were offset by gains from rising gold stocks, as the S&P/TSX composite index finished up 22.51 points at 15,153.12.
The downward pressure also hurt the Canadian dollar, which pulled back 0.24 of a U.S. cent to an average price of 77.03 cents US.
The loonie has been on a tear over the last week fuelled by growing expectations that the Bank of Canada will raise its key interest rate at its meeting on July 12.
Bangsund said the majority of economists surveyed believe that central bank governor Stephen Poloz will hike the rate, and investors have bought into that narrative by driving up the currency.
“If that doesn’t happen, you could see a pullback,” she said. “But the path of least resistance for the Canadian dollar is higher.”
Meanwhile, trading was similarly muted on U.S. markets, which reopened after taking the July 4 holiday off.
The Dow Jones industrial average fell 1.1 points to 21,478.17 and the S&P 500 index edged up 3.53 points to 2,432.54. The tech-heavy Nasdaq composite index climbed 40.80 points to 6,150.86.
Indexes seemed to shrug off the release of the June meeting minutes from the U.S. Federal Reserve, which showed that officials were at odds over when the central bank should start unwinding its US$45 trillion in bond holdings.
Bangsund says the indecisiveness between Fed officials have increased the odds that another forecasted rate hike will probably not be likely until December, instead of September. The Fed has raised rates, which sits at a still-low range of one per cent to 1.25 per cent, three times in the past six months.
Elsewhere in commodities, the August natural gas contract dipped 11 cents at US$2.84 per mmBTU and the September copper contract fell three cents at US$2.66 a pound. Bullion prices shone as the August gold contract gained $2.50 to US$1,221.70 an ounce.
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