China has an insatiable demand for energy. Or maybe not: Demand, the prime driver of the price of oil, was called into question by investors on Thursday after Chinese authorities announced that fuel prices - once heavily subsidized - will rise as much as 18 per cent starting on Friday. This fed concerns that millions of cars are going to be parked and oil will become an unwanted commodity.
The price of oil tumbled to $131.93 a barrel, down $4.75, or 3.5 per cent - its biggest percentage drop since the end of March and possibly its biggest dollar drop ever. The plunge sent oil back to where it was way back in ... well, last week.
Naturally, Canada's energy-heavy S&P/TSX composite index was hit hard, closing at 14,790.15, down 282.98 points, or 1.9 per cent. That marked the index's biggest one-day setback since March 19, when investors were alarmed by astounding losses in the financial sector.
The energy sub-index fell 4.2 per cent, the biggest drop in three months. Suncor Energy Inc. fell 6.8 per cent, EnCana Corp. fell 5.5 per cent and Canadian Natural Resources Ltd. fell 5.6 per cent. Together, these three stocks alone accounted for 113 points of Thursday's downturn.
In the United States, the declining oil price was welcomed. The Dow Jones industrial average closed at 12,063.09, up 34.03 or 0.3 per cent. The broader S&P 500 closed at 1342.83, up 5.02 points, or 0.4 per cent, with nine of the index's 10 sub-indexes rising.
Financial stocks, which had been down sharply earlier in the day, bounced off their lows. Citigroup Inc. fell 1.1 per cent and Bank of America Corp. fell 0.8 per cent. Meanwhile, American International Group Inc. surged 4.9 per cent higher after a Citigroup analyst upgraded the stock to a "buy" recommendation, saying it was too cheap to pass up.