Toronto stocks dived 2.4 per cent or 343 points on Wednesday, knocked back by another day of turmoil in oil markets.

Oil prices resumed their rout, diving five per cent by midday to just above $60 US per barrel after OPEC cut its forecast for world demand for oil. They recovered slightly at day's end.

On Tuesday, oil prices had stabilized and moved slightly higher after a two-week spiral downward caused by OPEC’s decision not to pull back on production. At a meeting in Vienna Nov. 27, OPEC said it would keep production targets at 30 million barrels a day.

But on Wednesday, OPEC estimated that world demand for OPEC oil in 2015 would be the lowest in 12 years at 28.9 million barrels a day. That’s less than the 30 million barrels a day that the oil cartel’s 12 members pumped last month.

WTI crude traded in New York was down $2.46 to $61.36 a barrel at 4 p.m. after trading as low as $60.21 earlier in the day. Meanwhile, Brent, the crude contract traded in most of the world, fell $2.20 to $64.64 a barrel.

While OPEC is leaving its production unchanged, it expects non-OPEC supply, driven by the U.S., Canada and Brazil, to expand next year by 1.36 million barrels a day to 57.31 million barrels a day. Total daily demand for crude is expected to rise just 1.2 per cent to 92.26 million barrels a day.

Supply outstripping demand is a recipe for falling oil prices, which is just what the markets delivered over the last two and a half months.  The WTI price is down 38 per cent since August.

The U.S. Energy Information Administration reaffirmed the supply glut in its report released Wednesday, saying oil stocks in the U.S. Midwest rose last week. Analysts had expected a decline.

Toronto market in correction

The falling price of oil and OPEC’s dim outlook knocked back Toronto stocks. The market fell 342.78 points to 13,852.95 at the close of trading. 

That's a drop of more than 12 per cent since its high in September, an official correction. It now is a bare 220 points or 1.5 per cent above where it started the year.

The Canadian dollar shed 0.34 of a cent to 87.11 cents US.

Energy stocks piled up losses, dropping 5.5 per cent, and the financial sector was also hard hit. But the pain was felt across the board as investors attempted to gauge the impact of lower crude prices on the Canadian economy.

The Dow was down 264 points or 1.5 per cent to 17,533, Standard-and-Poor's 500 index fell 33 points to 2,026 and the Nasdaq composite fell 82 points, or 1.7 per cent, to 4,684.

Meanwhile, oil companies around the world are starting to rein in spending plans.

The mounting pressure sent shares of most major oil companies down in trading Wednesday, including declines of roughly three per cent for Exxon Mobil Corp., ConocoPhillips and Chevron Corp. 

British Petroleum announced Wednesday a $1-billion restructuring that will result in the loss of thousands of jobs.

BP has already reduced its 2015 budget by $1 billion to $2 billion, and says further reductions might be on the way because of lower oil prices.

"Given the recent position taken by OPEC and with oil prices where they are today, we will continue to review this further," BP head of upstream Lamar McKay said in a presentation during an investor day in London.

'Treachery'

The turmoil in oil prices is exposing cracks in the OPEC oil cartel. Iran's President Hassan Rouhani has said the sharp fall in oil prices is the result of "treachery," in an apparent reference to regional rival Saudi Arabia, which opposed production cuts to lift prices.

Poorer OPEC countries such as Venezuela and Nigeria are already hurting from lower prices as they rely on oil to fill government coffers.

In Canada, Alberta premier Jim Prentice warned yesterday of belt-tightening because of lower oil prices. 

In his Financial Stability Assessment on Wednesday, Bank of Canada governor Stephen Poloz was muted in his outlook for the impact of oil prices.

“We are also monitoring other emerging vulnerabilities and risks to the global economic outlook, including the continued weakness in oil and other commodity prices that could cause financial stress in some economies,” Poloz said.

With files from Canadian Press