The Toronto Stock Exchange had its biggest one-day drop in more than 18 months on Monday as oil prices continued a sharp decline some industry analysts worry could extend into next year.

Slower growth in China’s economy is expected to keep a lid on demand for oil, sending prices down to their lowest level in five years.

Like a lump of coal in a Christmas stocking, the drop is bad news for the many oil and gas producers whose stocks trade on the Toronto Stock Exchange.

But for drivers in the Greater Toronto Area, falling oil prices and the resulting decline in gasoline prices could deliver the feeling that St. Nick has arrived ahead of schedule.

Prices at the pumps in Toronto dropped below $1 per litre Monday at some locations, including the Costco gas station near The Queensway and Royal York Rd.

It’s the first time the cost per litre has dipped below the dollar threshold in the city since August 2010, Dan McTeague, a former Liberal MP and the founder of Tomorrow’s Gas Price Today, a website dedicated to monitoring local gas prices, told the Star’s Laura Armstrong.

Though gas prices in Toronto averaged $1.06 per litre Monday and would hold steady Tuesday, McTeague said he expected the average cost to go down by two or three cents per litre as of Wednesday morning.

By then, McTeague estimated, about 100 stations across the GTA would be selling gas for less than $1 per litre. He anticipated that the price at stations outside Toronto, in areas such as Durham, Barrie, Guelph and Kitchener, would be hovering around or just below the dollar mark.

In New York, oil closed down $2.79 (U.S.) to $63.05 per barrel on Monday. That’s down nearly 40 per cent since midsummer.

Oil prices retreated in the wake of data showing China’s exports rose by a weaker-than-expected 4.7 per cent last month. Imports were forecast to post a small increase but instead contracted.

“It seemed to start with the news overnight that China’s economy is weakening,” Sal Guatieri, senior economist at BMO Capital Markets, said in an interview. “We saw some weaker trade numbers for that economy, and that just got the commodities ball rolling downhill.”

Also, Morgan Stanley said prices for Brent crude, an international benchmark for oil prices, could fall to as low as $43 per barrel.

U.S. markets were in the red Monday, but held steady with declines that amounted to less than 1 percentage point.

In contrast, the S&P/TSX Composite Index tumbled 329.53 points, more than two per cent, to close at 14,144.17 points. That’s that market’s biggest one-day loss since April 2013.

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The dizzying drop is not a surprise, given that energy stocks account for nearly 20 per cent of the index.

That’s second only to financial stocks, which account for just over one-third, or 36 per cent, of the S&P/TSX. Investors were already fretting over the shares of Canada’s big banks, following a parade of weaker than expected fourth-quarter results last week.

“It’s a two-headed Hydra,” Peter Buchanan, senior economist at CIBC World Markets, said in an interview.

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“Markets are still recovering from the banks’ disappointments last week, the concern that the string of better-than-expected earnings has come to an end, and oil prices have set a new multi-year low.”

Adding to those worries were disparate employment reports from Canada and the U.S., issued on Friday. While the Canadian economy shed a net 10,700 jobs in November, the economy gained an estimated 321,000 positions south of the border.

“The employment reports have clearly accentuated concerns that Canada is now on a softer growth track than the U.S. is,” Buchanan said.

China’s economic growth slowed to a five-year low of 7.3 per cent in the latest quarter. The ruling Communist Party is trying to cool growth to a more sustainable level, but cut interest rates last month in an apparent effort to reverse the deepening slowdown.

BMO is “cautiously optimistic on China’s outlook,” and expects oil prices to move back above $80 per barrel in 2015, Guatieri said

“Clearly China will not be accelerating or go back to nine- or 10-per-cent rates of growth. But seven per cent is three times faster than we’re growing,” he said. “As long as they can stabilize it around that rate, we think commodity prices will find a floor and we’ll even see oil prices firm up over the next year. But it could take a while.”

Morgan Stanley analyst Adam Longson said in a report on Monday that prices for Brent crude could fall as low as $43 a barrel next year. The U.S. investment bank cut its 2015 average estimate for Brent by $28 to $70 per barrel, and its 2016 estimate by $14 to $88.

Canadian economists are looking carefully at Alberta’s economy, along with those of Saskatchewan, and Newfoundland and Labrador, Canada’s three most oil-rich provinces.

BMO recently cut Alberta’s growth forecast to 2.4 per cent for 2015. That’s a full percentage point below the 3.4 per cent growth that was expected when oil prices were closer to $100 per barrel.

In contrast, BMO has slightly raised its outlook for Ontario to 2.5 per cent next year.

“Central Canada will benefit from lower energy costs and a lower Canadian dollar to boot that will support our exporters and manufacturing companies,” Guatieri said.

With files from The Star’s Laura Armstrong and Star wire services

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