TORONTO — Fresh comments from Iran about its intention to drive up oil production rattled the Toronto stock market Monday, with the news reminding investors on the resource-heavy index that the recent rally in crude prices may only have been temporary.
The S&P/TSX composite index fell 44.46 points to 13,477.54, amid declines in the energy, gold and materials sectors.
The Canadian dollar was lower against a strengthening U.S. greenback in advance of a two-day meeting of the U.S. Federal Reserve.
The loonie lost 0.21 of a U.S. cent to 75.37 cents US as investors awaited the latest policy rate announcement from the Fed on Wednesday.
The central bank is not expected to hike rates this time, but investors will still be closely monitoring its comments on the state of the U.S. and global economies for clues about possible moves in the future. The Fed raised its benchmark rate for the first time in almost a decade in December.
U.S. indexes ended the day with mixed results, with the Dow Jones industrials edging up 15.82 points to 17,229.13. The Nasdaq added 1.81 points to 4,750.28, while the broader S&P 500 shed 2.55 points to 2,019.64.
In commodities, the April contract for benchmark North American crude oil slumped $1.32 to US$37.18 a barrel after Iran's oil minister dismissed the idea of a production cap, saying his country will keep increasing output until it reaches pre-sanctions levels of four million barrels per day.
Four countries — Saudi Arabia, Russia, Venezuela and Qatar — have been in talks on a production cap in hopes of boosting global crude prices. The deal would only go ahead if other major producers agree. Iran, which is ramping up production following the removal of sanctions imposed over its nuclear program, has resisted the idea.
Andrew Pyle, a portfolio manager at ScotiaMcLeod, says the comments from Iran were not surprising but acted as an "excuse" for investors to do some profit-taking.
"We've had a pretty solid recovery of oil since earlier this year, since basically February," he said from Peterborough, Ont. "After such a move, you're going to get a pullback. And today was just a catalyst for some profit-taking. I think that's what it really was."
Pyle estimates that Iran is currently producing only about a million barrels a day and it looking to regain its share of the crude market and have production back up to the pre-sanction levels of 2008.
"However, most analysts would agree that this is something that will take time," he said, noting "there are logistics involved in returning to where you once were in terms of oil output and Iran is not there yet."
Elsewhere in commodities, April gold was down $14.30 at US$1,245.10 a troy ounce, while April natural gas was unchanged at US$1.82 per mmBtu. May copper was also barely changed at US$2.24 a pound.
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By Linda Nguyen, The Canadian Press