Canadian Stocks Drop on Oil Inventory Data; Energy Shares Slide

October 5, 2006 Filed Under: Mining Services, Mining Stocks, Oil and Gas  

Canadian stocks fell for a second day after a report showing an unexpected increase in U.S. oil supplies reinforced concern that profits at energy companies including Talisman Energy Inc. will slow.

“We keep seeing reports that the world seems to be awash in excess crude oil floating around,” said Fred Ketchen, director of equity trading at Scotia McLeod Inc. in Toronto. “The Canadian market is one that’s guided or pushed up or down by the strength in natural resources.”

The slide in commodity prices may “only be the beginning of a protracted bear market,” according to Merrill Lynch & Co. chief investment strategist Richard Bernstein.

The Standard & Poor’s/TSX Composite Index slid 53.01, or 0.5 percent, to 11,473.12 at 1:37 p.m. in Toronto. The benchmark index yesterday slumped 2.2 percent, its biggest one-day drop since June 13, as crude oil fell below $59 a barrel.

After setting a record on April 19, the S&P/TSX has fallen as much as 13 percent. The benchmark retreated 2.6 percent in September, its worst month since May, as commodity prices declined.

“We might get a little bit more of a selloff, but I don’t see it going below 11,000,” said Ketchen. “If we can stabilize our natural-resource sectors, there’s still a possibility that we can see this index back up to 12,200 to 12,300 by year-end.”

Talisman

Talisman, an oil and natural-gas producer, tumbled 37 cents to C$16.48. Banc of America Securities LLC analyst Robert S. Morris lowered his rating on the stock to “neutral” from “buy.” Petro-Canada, the No. 3 Canadian oil company, fell 16 cents to C$41.75.

A measure of oil-related companies retreated 1.1 percent and was the biggest drag on the benchmark among its 10 industry gauges. Energy shares, which tumbled 4.7 percent yesterday, are down 16 percent in the past month as oil prices slide.

Crude oil supplies rose 3.36 million barrels to 328.1 million in the week ended Sept. 29, the U.S. Energy Department said. A decline of 1.1 million barrels was expected, according to the median of responses in a Bloomberg News survey. Crude for November delivery slipped as much as 1.6 percent to $57.75 a barrel in New York and recently traded at $58.96.

Prices of commodities are about 60 percent higher than what’s justified by supply and demand, Merrill’s Bernstein wrote in a note to clients.

Producers of raw materials declined 1.9 percent for the steepest loss among the S&P/TSX’s 10 industry groups.

Goldcorp

Goldcorp Inc., Canada’s No. 3 gold producer, dropped 78 cents to C$23.22. Barrick Gold Corp., the world’s biggest gold company, fell 59 cents to C$31.37.

Gold prices fell for a fourth straight day on speculation a 16-month low in commodity prices will reduce the metal’s appeal as a hedge against inflation. Gold for December delivery retreated 1.5 percent to $573 an ounce in New York.

Research In Motion Ltd. climbed C$4.32 to C$118.72, heading toward a record close and resuming last week’s rally. The maker of the BlackBerry handset on Sept. 28 reported better-than- expected results, while its subscriber forecasts topped analysts’ estimates. Since then, the stock has surged 24 percent.

The following is a list of companies whose shares had unusual price changes in the Canadian market. Stock symbols are in parentheses after company names.

ACE Aviation Holdings Inc. (ACE/B CN), the owner of Air Canada, rose 48 cents, or 1.4 percent, to C$35.61. UBS AG analyst Fadi Chamoun raised the stock’s price target to C$37 from C$33, citing the increase in value of Aeroplan Income Fund, the airline’s customer-rewards program.

Brookfield Asset Management Inc. (BAM/A CN) climbed 55 cents, or 1.1 percent, to C$49.60. The real estate investor said it paid $460 million to buy 33 U.S. commercial properties from affiliates of JPMorgan Chase & Co.

Calfrac Well Services Ltd. (CFW CN) gained 28 cents, or 1.4 percent, to C$20.19. Shares of the oilfield-services company were lowered to “sector perform” from “outperform” by analyst Angela Guo at RBC Capital Markets.

Canadian Tire Corp. (CTC CN) fell C$3, or 2.7 percent, to C$107. The country’s biggest retailer of auto parts and household goods said Mike Lambert is leaving as co-president of its Mark’s Work Wearhouse unit to be finance chief at Canadian Pacific Railway Ltd. (CP CN). Paul Wilson, the unit’s other co- president since 2003, will be president when Lambert leaves.

Canadian Pacific added 46 cents, or 0.8 percent, to C$55.73.

Coolbrands International Inc. (COB/A CN) sank 19 cents, or 30 percent, to 45 Canadian cents. The company, which makes Eskimo Pie ice-cream sandwiches, said it will be late in releasing its full-year earnings statement because of “liquidity constraints.” The company may cut jobs and sell business units or assets to raise cash.

Mullen Group Income Fund (MTL-U CN) slipped 29 cents, or 1.4 percent, to C$20.71. Shares of the fund, which owns trucking businesses and provides oilfield services, were cut to “underperform” from “sector perform” by analyst Angela Guo at RBC Capital Markets. The fund’s shares plunged 13 percent in September.