(In U.S. dollars unless noted)
CALGARY, Alberta, Oct 6 (Reuters) - The Toronto Stock Exchange’s energy index .SPTTEN dropped to its lowest level in more than three years on Monday, as falling crude prices and the credit crunch hammered Canadian oil stocks.
The TSX energy index fell 27.46 points, or 9.9 percent to 248.33 by midday after earlier touching 230.25, its lowest point since May 2005.
“This is incredible, simply incredible,” said William Lacey, an analyst at FirstEnergy Capital. “Everybody is now looking at worst-case scenarios. You’ve got the liquidity crunch and general selling to try and get money. Anywhere there is a bid people are taking it and companies are getting absolutely crushed as a result.”
Shares in every major oil and gas company dropped, with most tumbling past their 52 week lows.
Imperial Oil Ltd (IMO.TO), the No. 2 refiner and explorer fell C$4.70, or 11 percent, to C$36.83, after earlier touching C$33.91 as oil prices sank below $90 a barrel for the first time since February and looked set to fall further.
Suncor Energy Inc (SU.TO), the No.2 oil sands producer, fell C$4.79, or 13 percent, to C$31.65 after dropping as low as C$28.68, and Nexen Inc NXY.TO shed C$2.80, or 13 percent to C$18.30.
“It all centers around the ability of these companies to tap the debt and equity markets to be able to fund their ongoing programs,” said Chris Feltin, an analyst at Tristone Capital. “There’s a feeling that global demand for crude oil is going to be quite a bit lower than anticipated.”
Worst hit was Oilexco Inc OIL.TO, which operates in the North Sea. On Friday the company lowered its production targets for 2008 and said it was having difficulty boosting its credit lines to $1 billion from $700 million.
After dropping 17 percent on Friday, Oilexco shares fell a further C$2.77 to C$5.08, after earlier falling as low as C$3.94, 50 percent below their close on Friday
With the financial crisis widening from Wall Street to Europe and Latin America, analysts said shares are unlikely to stabilize until oil prices firm.
Last week Merrill Lynch said oil could drop to $50 a barrel if the slowdown deteriorates into a recession. On Monday, UBS lowered its forecasts for benchmark North American oil prices for next year to $105 a barrel from $120.
“I would be hesitant to say that this is the bottom,” Feltin said. “We need to see some evidence that the global markets are strengthening and stable before there’s any investor confidence.”
$1=$1.11 Canadian Reporting by Scott Haggett; editing by Rob Wilson