Cars line up for $2.29 regular gasoline at the Costco in Beltsville, Maryland December 16, 2014. U.S. stock index futures fell on Tuesday as a slide in the Russian rouble and crude oil prices sent traders fleeing risky assets. Brent crude lost more than 3
IN PHOTO: Cars line up for $2.29 regular gasoline at the Costco in Beltsville, Maryland December 16, 2014. U.S. stock index futures fell on Tuesday as a slide in the Russian rouble and crude oil prices sent traders fleeing risky assets. Brent crude lost more than 3 percent to $58.96 per barrel after hitting a low of $58.50 and U.S. crude was down almost 3 percent at $54.26 after hitting $53.80. Reuters/Stringer

The Canadian oil industry is under pressure from the plummeting oil prices. It is limiting the ability of Canadian oil producers in luring investors with lavish dividends as cash flow is coming under stress and squeezed by crude trading at five-year lows. The falling prices of crude are facing the biggest annual decline since the financial crisis erupted and abetted by weakening demand spurred by global supplies and OPEC's refusal to cut production.

Already there is a 46 percent drop in North American oil prices. Deep spending cuts in oil companies are in the air and analysts warn that corporate budgets and staff numbers are facing gretaer risk if the commodity-price rout continues, reports Globe and Mail. Canadian Oil Sands Ltd. is planning to cut its quarterly dividend 42 percent in January, and has stated it in its 2015 budget forecast. "Now oil companies have to reduce payments to shareholders," noted Sprott Asset Management LP's Eric Nuttall.

"The sustainability of the dividend model at current oil prices in Canada looks challenged," said Nuttall, who predicted capital spending to fall 15 percent in 2015 with cut in dividends as low prices are likely to stay.

Skid in Oil Stocks

The skid in crude prices is now showing up in the shares of many energy companies in Canada with the Toronto Stock Exchange's energy group losing 17.6 percent of the value in the past 12 months, despite a surge in the first half of 2014. There is already a reduction in spending among energy companies, which are having high debt levels, as a hedge against declining cash flow expectations. They include Lightstream Resources Ltd. and Penn West Petroleum Ltd, who would also cut dividends.

The U.S. benchmark West Texas Intermediate crude settled at a 5 year low of $53.27 a barrel after U.S. government data showed a two million-barrel buildup of inventories at the Cushing, Okla. pipeline and storage hub. Western Canada Select heavy crude, a bellwether for the oil sands, is down 51 percent, according to data from FirstEnergy Capital Corp, reports Bloomberg.

Over Supply

The Organisation of the Petroleum Exporting Countries has refused to lower 30 million-barrel-a-day output quota. The spectre of an oversupply is in sight. Many analysts are predicting immediate recovery in prices in the first half of 2015. Recent moves by the U.S. administration to loosen restrictions on oil exports in dealing with surging light oil supplies from North Dakota and Texas will also imply more crude flowing into global markets.