Lowest Oil Price in Five Years Drags Loonie and TSX Down

Oil has fallen below $50 a barrel for the first time since 2009, dragging down the Canadian dollar as well as two key indices.

West Texas Intermediate crude oil fell briefly to $49.95 a barrel — down 5 percent from time of closing on Friday — before recovering to $52.69 by close of day. Brent crude also hit a five-and-a-half-year low, touching $52.66 per barrel before rebounding to $56.42. Both crude oil benchmarks have lost half of their value since mid-2014.

Both the S&P/TSX Composite index (INDEXTSI:OSPTX) as well as the S&P TSX Venture Composite index (INDEXTSI:JX) dropped Monday morning due to the news. The former fell 360 points — equivalent to 2.45 percent — while the latter fell 12.83 points, equivalent to 1.82 percent, by the time of writing.

The Canadian loonie fell below 85 cents US, its lowest point in five years, as it struggled to grapple with falling oil prices affecting the Alberta oil sands.

However, the glut of oil has done little to hamper the American dollar, which rose as shale production in the country continues unabated.

There are conflicting opinions on what’s in store for the future. While Scotiabank’s Patricia Mohr expressed optimism about the oil price midway through December, more recently, Marin Katusa, hedge fund manager and energy investment strategist at Casey Research, told The Province, “I think we’re going to touch a low of $40-$45 a barrel by Labour Day (2015).”

His advice for investors is to “[b]e patient and invest in the right management teams.”

Securities Disclosure: I, Nick Wells, hold no direct investment interest in any company mentioned in this article.