Canada’s benchmark stock index closed at a record high on Monday, getting a boost from a rally in energy stocks and rising oil prices after OPEC+ nations failed to reach a deal to boost production.
On a day when Wall Street was closed for the Fourth of July holiday, the S&P/TSX Composite Index rose 55.35 points, or 0.27%, to an all-time peak of 20,281.46. It was the first time Canada’s main index finished at a record since June 16.
The TSX energy sector rose just over 2% as the U.S. crude contract gained 1.54% to US$76.32 - its highest level since 2018.
OPEC+ ministers abandoned the talks and set no new date to resume them, after clashing last week when the United Arab Emirates rebuffed a proposed eight-month extension to output curbs.
The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, agreed on record output cuts in 2020 to cope with a COVID-induced price crash.
The producers have been gradually easing the output restrictions, but a plan on Friday to lift output by about 2 million barrels per day (bpd) from August to December 2021 and to extend the pact on a series of gradual output shifts to the end of 2022 was blocked by the UAE.
The prospect of OPEC+ not adding the extra barrels to the market next month boosted prices, but also added volatility, said Rystad Energy oil markets analyst Louise Dickson, noting that prices briefly turned negative.
“The fact that the meeting got postponed today and the time it took for this to be announced shows that there are some negotiations on the sidelines,” she said.
ING Economics said OPEC+’s failure to come to a deal may provide some brief upside to oil prices but said “it could also signal the beginning of the end for the broader deal, and so the risk that members start to increase output.”
Meanwhile, world equity markets clung close to record highs on Monday as worries about the Delta variant of COVID-19 offset positive sentiment from surging euro zone business activity and a welcome U.S. jobs report on Friday.
Trading was thinner than usual with U.S. markets closed for the extended 4th of July weekend.
“Markets in general are still trying to find their feet,” said James Athey, investment director, Aberdeen Standard Investments.
“Equities, of course, continue to shrug off or ignore anything that might be considered remotely negative as they continue their merry and complacent dance towards an inevitable reckoning.”
The August gold contract was up US$8.70 at US$1,792.00 an ounce and the September copper contract was up 6.2 cents at nearly US$4.34 a pound.
With files from Reuters