As the price of crude oil has plunged in recent months, many Canadians have noticed the drop’s corresponding effect on gas prices.
What they may not have noticed is savings at the pumps being offset by losses in their portfolio.
The energy sector is the second largest in the Canadian economy – which means any broad-based investments are feeling the sting to some degree.
“Anybody who has exposure to the broad Canadian market, by definition, has a broad exposure to energy,” Canaccord Wealth Management investment advisor Peter Chandler said.
That exposure almost certainly means short-term losses – and further losses to come, given Goldman Sachs forecasts oil prices sliding to as low as US$41 per barrel.
The current low oil prices are generally considered to be due to Saudi Arabia refusing to cut its production of crude oil.
With consumption dropping and production remaining stagnant, the demand for oil is decreasing – taking prices along with it.
Philippe Dauba-Pantanacce, a senior economist with Standard Chartered, says he believes the supply and demand levels will eventually return to a situation closer to that seen in the first half of 2014.
“We do think that through formal or informal ways, OPEC in general will end up cutting some of its oil production,” he told BNN.
“This could go the other way around – very quickly.”
That has Chandler seeing reason for optimism as long as investors can remain patient.
“Most experts are calling for energy to snap back sometime in the second half of this year,” he said.
“If one takes a longer-term view … these types of short-term volatility usually represent the best opportunities for investors.”
Dropping oil prices are also weakening the Canadian dollar – something analysts say could lead to improvements in Canada’s manufacturing and export sectors and balancing out the effects of falling crude on the national economy.
