June 29 (Bloomberg) -- Canadian stocks declined, led lower by energy companies such as Petro-Canada, as oil prices dropped for a second day.

``Oil and oil stocks have gone skyward lately, so there's bound to be a pullback coming,'' said Thomas Caldwell, chairman of Caldwell Securities Ltd. in Toronto that manages the equivalent of $812 million. ``But you're going to see a realignment on the index towards'' companies that benefit from lower energy costs such as mining company Inco Ltd. Caldwell owns energy shares including Petro-Canada.

The Standard & Poor's/TSX Composite Index extended early losses, slipping 57.76, or 0.6 percent, to 9983.27 as of 12:32 p.m. in Toronto.

Oil fell below $58 a barrel after a government report showed U.S. stockpiles of transport and heating fuels rose as refiners increased production. Crude for August delivery declined 1.6 percent to $57.30 a barrel in New York. Oil, which reached a record $60.95 two days ago, fell 3.9 percent yesterday, its biggest slide since April 29.

Petro-Canada, the third-largest domestic oil producer, lost C$2.44 to C$79.53. Canadian Natural Resources Ltd., the country's No. 2 natural-gas producer, fell C$1.30 to C$44.25. EnCana Corp., Canada's largest natural-gas producer, slid C$1.43 to C$48.67.

Energy shares comprise a fourth of the S&P/TSX and have gained 31 percent this year for the best performance in the benchmark. Today, a measure of the shares fell 2.3 percent for the biggest decline.

Raw-Materials Shares

Shares of raw materials companies, which use oil to produce their goods, gained 0.7 percent as crude slid. Materials stocks were one of only two groups that rose on the S&P/TSX.

Inco, the world's No. 2 nickel producer, added 19 cents to C$47.20. Barrick Gold Corp., the world's third-biggest gold miner, advanced 66 cents to $31.04 as all 18 gold shares in the Canadian benchmark increased. Kinross Gold Corp., Canada's third-largest gold producer, gained 14 cents to C$7.27.

The following is a list of companies whose shares are making unusual price changes in the Canadian market today.

Labopharm Inc. (DDS CN) gained 16 cents, or 6.1 percent, to C$2.78. The drug developer said it agreed to a $10 million debt financing with Hercules Technology Growth Capital Inc. Proceeds from the financing will be used to help commercialize the company's once-daily formulation of painkiller tramadol in Europe.

Mega Bloks Inc. (MB CN) jumped C$1.63, or 7.4 percent, to C$23.63 for the biggest increase in the S&P/TSX. The world's No. 2 maker of toy building blocks said it plans to sell 3.1 million subscription receipts at C$22.25 each. The proceeds will be used to help fund Mega Block's purchase of Rose Art Industries Inc. and Warren Industries Inc.

Minefinders Corp. (MFL CN) fell 68 cents, or 10 percent, to C$5.83. GMP analyst Jacques Wortman cut the exploration company's price expectation to C$8 per share from C$13.

PetroKazakhstan Inc. (PKZ CN) lost C$5.16, or 11 percent, to C$42.62. Kazakhstan may exercise its priority right to buy the Canadian company that produces oil in the central Asian country, the Kazakh energy minister said. On June 27, PetroKazakhstan issued a statement saying it had been approached for a possible takeover or merger. Kazakh law says the government has priority rights to buy any oil asset for sale on its territory.

To contact the reporter on this story: Sophie Hayward in New York at Shayward2@bloomberg.net.

Last Updated: June 29, 2005 12:37 EDT