TORONTO – The Toronto stock exchange reversed course from the previous day’s big loss to post a triple-digit gain Tuesday as zig-zagging oil prices rose sharply.
The S&P/TSX composite index closed up 188.16 points at 12,331.32, following a 246-point decline on Monday.
The heavily weighted energy subsector rose by more than four per cent as the March contract for North American benchmark crude oil rose $1.11 to settle at US$31.45 a barrel.
The commodity-sensitive loonie was also a big beneficiary of the jump in oil prices, rising 0.97 of a cent to end trading at 71.05 cents US.
The last time the loonie closed above 71 cents US was on Jan. 6 and the currency fell as low as 68.21 cents US last week, according to Bank of Canada data.
Kash Pashootan, portfolio manager at First Avenue Advisory, a Raymond James company, said the rebound in oil prices from a 13-year low of US$28.35 last week could be temporary.
“You don’t want to let a few days of stability in oil prices fool you into thinking we’ve reached the bottom, because that type of thinking would have been wrong at least a handful of times over the last even just six months,” he said.
Pashootan said the root cause for the slide in the price of oil, which has fallen from a high above US$105 in June 2014, is a worldwide supply glut that shows little sign of easing.
On Tuesday Canada joined the United States and other world powers in dropping sanctions against Iran in return for that country’s abandonment of its nuclear ambitions.
Now, with Iran’s oil poised to flood an already oversaturated market, Pashootan says there is still a significant chance that oil could fall even further.
“We need to see more consolidation in the industry, we need to see more blood, we need to see more oil companies go bankrupt, we need to see more defaults and dividend cuts,” he said.
“Oil companies have been doing everything they can to buy time, but unfortunately there’s no evidence that oil prices are going to stabilize any time soon.”
In other commodities the March contract for natural gas added 0.3 of a cent to US$2.158 per mmBtu and February gold advanced $14.90 to US$1,120.20 a troy ounce.
In New York, the Dow Jones industrial average bounced back from a 208-point decline the day before as it soared 282.01 points to 16,167.23. The S&P 500 gained 26.55 points to close at 1,903.63 and the Nasdaq added 49.18 points to 4,567.67.
In Europe, Germany’s DAX and France’s CAC 40 both rose 1.1 per cent, while Britain’s FTSE 100 gained 0.6 per cent.
It was a different story in Asia, where markets reacted strongly to Monday’s big downturn in oil prices.
China’s Shanghai composite index dropped 6.4 per cent to finish at 2,749.78, the lowest it’s been since December 2014, while markets in Hong Kong and Japan both declined about 2.5 per cent.