Energy sector weighs on Canadian markets as oil drops below US$70 a barrel

Canada's main stock index continued to fall Friday as the price for oil moved below US$70 a barrel and further dragged down the important energy sector.

The movement came following reports that Russia and OPEC countries plan to produce more oil soon

The S&P/TSX composite index shed 37.95 points to 16,075.67. (Aaron Vincent Elkaim/Canadian Press)

Canada's main stock index continued to fall Friday as the price for oil moved below US$70 a barrel and further dragged down the important energy sector.

"Today, oil is by far the major story," said Macan Nia, a senior investment strategist at Manulife Investments. "We're seeing markets down today mainly on the news of oil."

The S&P/TSX composite index shed 37.95 points to 16,075.67. The energy sector once again dragged down the index, with shares in the sector losing an average of 2.7 per cent of their worth as the price of oil slipped.

The July crude contract retreated US$2.83 to US$67.88 per barrel.

That movement came following reports that Russia and OPEC countries plan to produce more oil soon, which would pump supply into the market. The Organization of the Petroleum Exporting Countries is set to meet in late June when it could alter its current policy from a previous meeting where members agreed to curb production.

Russia and OPEC may move to raise production to make up for an anticipated lower output from Iran and Venezuela, Nia said.

If the global community pursues sanctions against Iran that is likely to negatively impact its oil supply, he said, while Venezuela's deteriorating economic environment means it will be hard for the nation to continue production at current levels.

In New York, the Dow Jones industrial average fell 58.67 points to 24,753.09. The S&P 500 index lost 6.43 points to 2,721.33 and the Nasdaq composite index gained 9.42 points to 7,433.85.

South of the border, markets saw lower trade volumes, Nia said, which is typical heading into a long weekend. U.S. markets will be closed Monday for Memorial Day.

The Canadian dollar averaged 77.08 cents US, down 0.49 of a U.S. cent.

Elsewhere in commodities, the July natural gas contract fell about a penny to US$2.96 per mmBTU. The June gold contract shed 70 cents to US$1,303.70 an ounce and the July copper contract declined by about two cents to US$3.08 a pound.

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