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Oil prices plunged on Friday on concerns about oversupply, sending world stock markets lower as lagging energy shares weighed down Wall Street.

Both Brent and U.S. crude fell to their lowest levels since October 2017 and were on course for their biggest one-month decline since late 2014. Although the Organization of the Petroleum Exporting Countries is expected to curb output, rising U.S. oil supply has fueled persistent concerns about a global surplus.

Tumbling oil prices pushed U.S. energy shares down more than 3 per cent. As a result, the benchmark S&P 500 stock index ended lower to confirm correction territory, having dropped more than 10 per cent from its record closing high in late September. Trading volume was light in a shortened session after the Thanksgiving holiday.

MSCI’s gauge of stocks across the globe also fell.

Canada’s main stock index tumbled on Friday as a dive in oil prices hammered shares of energy companies.

The Toronto Stock Exchange’s S&P/TSX Composite index was unofficially down 80.80 points, or 0.54 per cent, at 15,010.78.

Energy stocks dropped 4.7 per cent.

Cenovus Energy Inc. was down 8.3 per cent, while Seven Generations Energy Ltd. and Canadian Natural Resources Ltd. dropped 6.7 per cent and 6.2 per cent, respectively.

Among other weak spots, the materials sector, which houses precious and base metals miners, lost 2.3 per cent after gold slipped as the dollar regained momentum.

First Quantum Minerals Ltd. was down 5.2 per cent, while Teck Resources Ltd. lost 4.1 per cent.

Underwhelming economic data from Europe also dimmed market sentiment, investors said. Surveys of German and euro zone purchasing managers came in weaker than expected.

“Oil dropped, and some of the numbers from Europe have been a little weak,” said John Carey, managing director and portfolio manager at Amundi Pioneer Asset Management in Boston.

“Today just confirms the recent weakness due to persisting worries about the economy and the effect of higher interest rates on price-to-earnings multiples, borrowing costs and so forth.”

Prices of base metals, including nickel and copper, fell sharply on worries of weakening demand in China and a slowdown in global growth as a result of trade tensions between China and the United States.

In response to falling oil and U.S. stock prices, benchmark U.S. Treasury yields fell to eight-week lows on Friday as investors moved to safe-haven buying of long-dated U.S. government bonds.

The dollar index, which measures the greenback against a basket of six currencies, also advanced, up 0.25 per cent, in keeping with the theme of declining risk appetite.

The Dow Jones Industrial Average fell 178.74 points, or 0.73 per cent, to 24,285.95, the S&P 500 lost 17.37 points, or 0.66 per cent, to 2,632.56 and the Nasdaq Composite dropped 33.27 points, or 0.48 per cent, to 6,938.98.

Benchmark 10-year notes last rose 4/32 in price to yield 3.0463 per cent, from 3.061 percent late on Wednesday.

U.S. stock and bond markets closed early on Friday. They were closed on Thursday for the Thanksgiving holiday.

Oil prices slumped up to nearly 8 per cent to the lowest in more than a year on Friday, posting the seventh consecutive weekly loss, amid intensifying fears of a supply glut even as major producers consider cutting output.

Oil supply, led by U.S. producers, is growing faster than demand and to prevent a build-up of unused fuel such as the one that emerged in 2015, the Organization of the Petroleum Exporting Countries is expected to start trimming output after a meeting on Dec. 6.

But this has done little so far to prop up prices, which have dropped more than 20 percent so far in November, in a seven-week streak of losses. Prices were on course for their biggest one-month decline since late 2014.

A trade war between the world’s two biggest economies and oil consumers, the United States and China, has weighed upon the market.

“The market is pricing in an economic slowdown - they are anticipating that the Chinese trade talks are not going to go well,” said Phil Flynn, an analyst at Price Futures Group in Chicago, referring to expected talks next week between U.S. President Donald Trump and his Chinese counterpart Xi Jinping at the G20 summit in Buenos Aires.

“The market doesn’t believe that OPEC is going to be able to act swiftly enough to offset the coming slowdown in demand,” Flynn said.

Brent crude futures settled down $3.80 a barrel, or 6.1 per cent at $58.80. During the session, the benchmark dropped to $58.41, the lowest since October 2017.

U.S. West Texas Intermediate crude (WTI) lost $4.21, or 7.7 per cent, to trade at $50.42, also the weakest since October 2017. In post-settlement trade, the contract continued to fall.

For the week, Brent fell 11.3 per cent and WTI posted a 10.8-per-cent decline, the largest one-week drop since January 2016.

Market fears over weak demand intensified after China reported its lowest gasoline exports in more than a year amid a glut of the fuel in Asia and globally.

In contrast to U.S. stocks, European equities rose, led by a rally in Italian stocks as the country’s bond yields fell after a press report that EU Affairs Minister Paolo Savona is considering resigning over the government’s decision to challenge European Union budget rules. Savona denied the report.

The pan-European STOXX 600 index rose 0.4 per cent.

In currency markets, disappointing survey data from European purchasing managers pushed the euro down 0.7 per cent.

The pound was down 0.6 per cent on concerns over the passage of an agreement for Britain to leave the European Union.

Reuters

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 29/05/24 4:00pm EDT.

SymbolName% changeLast
CVE-T
Cenovus Energy Inc
-1.12%28.3
CNQ-T
Canadian Natural Resources Ltd.
-2.5%103.03
FM-T
First Quantum Minerals Ltd
-4.38%17.69

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