Stocks, consumer confidence, housing gripped by crashing oil prices

WATCH: Investment firm Morgan-Stanley forecast the price of a barrel will drop as low as US $43 a barrel next year. As Eric Sorensen reports, there are winners and losers when the oil prices keep sinking.

Oil’s collapse is deepening, cutting a wide swath across Canada’s economy in the process.

Outright fear gripped Canadian energy stocks on Monday after an influential analyst report suggested crude prices could fall to as low at $43 a barrel (U.S.), sparking a sell-off of major oil patch firms like Suncor, Imperial Oil and Encana.

The report helped send oil prices to levels not seen since mid-2009 when the Canadian and global economy were mired in recession. International oil prices have now fallen more than 35 per cent since the summer.

U.S. investment bank Morgan Stanley said it believes oil could crumble to the low-$40s range, with “peak oversupply” flooding the market during spring or early summer 2015.

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The read-through: further turbulence lies ahead, for stock markets, the Canadian dollar, government revenues and the economy. “Markets risk become unbalanced,” the Morgan Stanley report said.

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A report from CIBC also released Monday suggests the loonie could hit as low as 81 cents by late next year, down from around 87 cents U.S. currently.

MORE: TSX plunges amid oil and energy sell-off

The energy sector’s plunge led a rout of the Toronto Stock Exchange on Monday afternoon, with the main S&P TSX index falling more than 450 points or 3 per cent before rebounding to a decline of 330 points, or 2.3 per cent.

Confidence shaken

Rattled share prices are being joined by consumers. Canadians’ outlook for housing and their job security have deteriorated alongside oil’s plunge.

Poll figures released by Ottawa-based Nanos Research on Monday showed the share of respondents who say they feel at least “somewhat” secure in their job declined to 67.7 per cent. The same figure on Nov. 21 stood at 70.1.

More are also uncertain about property values, which have enjoyed big run-ups in recent years in markets like Calgary, thanks to rallying oil prices.

‘The near-40 per cent drop in oil prices since July is likely to hit commodity-driven markets’ – TD

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The share of respondents who expect values to remain at least the same through the first half of 2015 fell to 83.4 per cent versus 84.2 per cent in late November.

The share of those who said they thought prices would fall or weren’t certain where home prices would head rose to 16.6 per cent, up from 15.8 per cent.

“The near-40 per cent drop in oil prices since July is likely to hit commodity-driven markets notably over the next year,” Diana Petramala, an economist at TD Economics said Monday.

“Markets like Calgary and Edmonton, which were once expected to remain beacons of strength for Canadian housing, are expected to soften in 2015,” the TD economist said.

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