Canada’s main stock index rose to its highest level since February as the energy sector was powered by oil prices surging to a 10-month high.
The key commodity sector climbed 7.3 per cent as crude briefly topped US$50 a barrel for the first time in almost a year.
The price bounced higher as OPEC signalled it would hold production constant through its February meeting and Saudi Arabia may institute an output cut.
There had been concerns that the oil cartel would start to normalize production even as countries again go into COVID-19 lockdowns, said Greg Taylor, chief investment officer of Purpose Investments.
“But it feels now that OPEC’s playing ball and trying to get the price higher and that’s really showing up in the price of the oil companies today,” he said in an interview.
West Texas Intermediate gained nearly five per cent.
The February crude oil contract was up US$2.31 at US$49.93 per barrel and the February natural gas contract was up 12.1 cents at US$2.70 per mmBTU.
After hovering around US$40 for much of the summer, rising to nearly $50 a barrel is good for oil producers whose business models work better if they start generating more cash.
Taylor said many investors have ignored the energy sector over fears about the commodity.
“But if the price can stay above $50, these companies are incredibly cheap and really could be setting up for some good gains in the year.”
Several Canadian oil producers moved higher Tuesday with Crescent Point Energy Corp. up 9.6 per cent, Vermilion Energy Inc. up 9.1 per cent, Whitecap Resources Inc. up 8.9 per cent and Suncor Energy Inc. 8.1 per cent higher.
The Canadian dollar traded for 78.70 cents US, its highest level in almost three years and compared with 78.43 cents US on Monday.
Eight of the 11 major sectors of the TSX were higher, helping to push the S&P/TSX composite index to close up 153.82 points to 17,681.59. It reached an intraday high of 17,694.40 that’s 1.5 per cent from its record high set in February.
U.S. stock markets bounced back from Monday’s losses, gaining on anticipation that the Republicans would retain control of the Senate after Tuesday’s run-off elections in Georgia.
In New York, the Dow Jones industrial average was up 167.71 points at 30,391.60. The S&P 500 index was up 26.21 points at 3,726.86, while the Nasdaq composite was up 120.51 points at 12,818.96.
The mood would likely sour if Democrats swept both races and gained full control of Congress and the White House, said Taylor.
A resurgence of the so-called blue wave that some investors had feared heading into the November election, could cause a bit of a pullback from the recent rally on expectations of higher taxes and more regulations on tech stocks, he said.
But Democratic control could also be positive for Canada’s health-care sector because it could speed up legalization of cannabis in the U.S.
Materials fell back after gaining ground Monday even though metals prices were higher. Shares of Iamgold Corp. and New Gold Inc. lost 4.2 and four per cent, respectively.
The February gold contract was up US$7.80 at US$1,954.40 an ounce and the March copper contract was up 8.5 cents at US$3.64 a pound, its highest level in nearly eight years.
Rising copper prices are seen as a sign of optimism that the world will reopen and get back to normal, added Taylor.
“Copper is a great leading indicator and when copper goes that should help with oil as well. It’s good for the overall commodity complex.”
Ross Marowits, The Canadian Press