Canadian dollar slides as oil sinks below $43 US a barrel

The Canadian dollar lost two-thirds of a cent to closeat 75.38 cents US on Tuesday, dragged lower largely due to continuing weakness in oil prices, which slid below $43 a barrel.

Oil was off by more than $1 to $42.92 in the afternoon as tradersdigested the details ofMonday evening's U.S. budget deal, part of which will require America to sell off58 million barrels of oil from its strategic petroleum reserve, a move that will flood oil markets that are already awash in oversupply.

• Oil price will crash again once storage tanks fill up, Goldman warns

That's about eight per cent of all the oil that the U.S. holds in reserve for safekeeping something it has done since the oil crisis in the 1970s prompted lawmakers to ensure the American economy had an emergency oil supply if foreignsources ever dried up.

The move is likely to bring in billions of dollars for America's government coffers, but will only add to an oil glut that currently sees the world pumping out about two million more barrels of oilthan it needs every day.

That's driven prices from above $100 a barrel in 2014 to their current levels.

Oil's mini-rally ends

U.S. oil prices touchedsix-year lows this summer,briefly dipping under $40 a barrel. But they have recovered some of their losses as companies cut back on production.

Energy analyst Jim Ritterbusch said a recent increase in oil stockpiles, the result of decreased refining production, has sent oil prices back down.

"This production decline that's been supporting crude prices through the late summer-early fall period is beginning to dissipate," he said. Ritterbusch said he thinks U.S. crude will slip back to its August lows of around $38 a barrel and stay there through the end of 2015.

Bad news for oil generally means bad news for the Canadian dollar, too, as the loonie's fortunes have been closelytied to the oil price in recent years.

The looniebegan the day above the 76-cent level but was hovering midway between 75 and 76 cents late in the trading day.

Oil prices dragged down energy company stocks, of which there are a lot on the Toronto Stock Exchange. The weakness in oil dragged the TSX'scomposite index lower, down 91 points to 13,699 late in the trading day.