10/02/2014 01:53 EDT | Updated 12/02/2014 05:59 EST

Falling oil prices drive down TSX again

The Toronto stock market extended its losses Thursday with energy stocks leading a decline caused by the falling price of oil.

The S&P/TSX composite index had declined 62 points to 14,647 by late afternoon, after being down 180 points earlier in the day. That drop follows a 115-point tumble Wednesday.

U.S. indexes seemed heading for a fourth straight decline in the morning. But Dow Jones industrial average reversed its trajector and was up 32 points at 16,836 by 3 p.m, while the Standard-and-Poor's 500 index was up six points to 1,949.

Oil and metal prices broke through important levels on Thursday, amid worries about a faltering global economy.’ November crude in New York was down 54 cents to $90.19 US a barrel, but up from as low as $88.18 in the morning after Saudi Arabia's national petroleum company, cut its official selling price for crude oil to the U.S., Europe and Asia.

The drop in price comes at a time when both the Organization of Petroleum Exporting Countries and the U.S. are increasing oil output. Many analysts were surprised Saudi Arabia was prepared to compete on oil prices, as it usually works with OPEC to keep supply in check.

The TSX energy sector is down about 12 per cent over the past month and was a major contributor to the Toronto market losing more than four per cent during September.

The mining sector also fell two per cent with December copper down three cents to $2.99 US a pound.

A U.S. factory output report this morning left investors worried, as August orders were down 10 per cent, mainly because of fewer aircraft orders.

The news out of Europe also discouraged traders, as the European Central bank announced it will will start buying bonds made of bundles of bank loans in October in an effort to kickstart moribund economies.

But it is the general strength of the U.S. economy and the prospect of an interest rate hike in early 2015 that is generating the downward pressure.

Many traders see the record prices run up this summer as a bubble and are taking profits when they can.

"We could assign a reason for it but the reality is the market is correcting because that`s what the market does," said Kash Pashootan, portfolio manager at First Avenue Advisory in Ottawa, a Raymond James company.

"We have had essentially 24 months of straight gains and valuations become frothy and at some point it corrects — it's just the market being the market."