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After calm morning, oil takes sudden plunge
Source: Agencies |
September 18, 2012, Tuesday
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OIL plunged more than US$4 per barrel in a short time yesterday afternoon, erasing the gains made last week when the Federal Reserve unveiled new steps to boost the US economy.
Benchmark crude fell US$2.38, or 2.4 percent, to finish at US$96.62 a barrel on the New York Mercantile Exchange. It was the biggest percentage decline since July 23. Oil dropped below US$95 per barrel during the rapid sell-off before recovering a bit.
Traders were unsure of the cause of yesterday's price drop. Some questioned whether an errant trade or another rumor about a release of oil from the Strategic Petroleum Reserve was to blame.
Chris Grams, a spokesman for NYMEX operator CME Group, said there were no technical glitches behind the price drop.
The White House has been considering tapping the SPR to stem the rising cost of crude and gasoline. A little over a week ago, Reuters reported the Obama administration was considering a release much larger than the 30 million barrels from last year.
Some analysts suggested the price of oil had gotten too high given continued weakness in the global economy, and that the euphoria over the Fed had worn off.
Oil rose 2.7 percent last week, with most of the gains coming after the US central bank announced a plan aimed at lowering long-term interest rates and boosting hiring. The gains came even as some experts questioned how much the Fed's moves would actually help the economy.
Oil touched US$100 briefly on Friday, its highest point in four months. It held to slight gains above US$99 for most of yesterday.
"Sometimes the market is slow to react," said Gene McGillian, a broker and analyst at Tradition Energy in Stamford, Connecticut. "Conditions were right today - the market has been overdue for a bit of a correction."
Brent crude, which is used to price international varieties of oil, fell sharply as well. Brent lost US$2.87, or 2.5 percent, to US$113.79 on the ICE Futures Exchange in London.
"I think this wash out is a pretty good indication that the rally may be done, and now we're going to turn back," McGillian said.
In other energy futures trading in New York:
- Wholesale gasoline dropped 7.23 cents to US$2.9433.per gallon
- Natural gas fell 7.8 cents to US$2.865 per 1,000 cubic feet.
- Heating oil slipped 7.61 cents to US$3.1634 per gallon.
Benchmark crude fell US$2.38, or 2.4 percent, to finish at US$96.62 a barrel on the New York Mercantile Exchange. It was the biggest percentage decline since July 23. Oil dropped below US$95 per barrel during the rapid sell-off before recovering a bit.
Traders were unsure of the cause of yesterday's price drop. Some questioned whether an errant trade or another rumor about a release of oil from the Strategic Petroleum Reserve was to blame.
Chris Grams, a spokesman for NYMEX operator CME Group, said there were no technical glitches behind the price drop.
The White House has been considering tapping the SPR to stem the rising cost of crude and gasoline. A little over a week ago, Reuters reported the Obama administration was considering a release much larger than the 30 million barrels from last year.
Some analysts suggested the price of oil had gotten too high given continued weakness in the global economy, and that the euphoria over the Fed had worn off.
Oil rose 2.7 percent last week, with most of the gains coming after the US central bank announced a plan aimed at lowering long-term interest rates and boosting hiring. The gains came even as some experts questioned how much the Fed's moves would actually help the economy.
Oil touched US$100 briefly on Friday, its highest point in four months. It held to slight gains above US$99 for most of yesterday.
"Sometimes the market is slow to react," said Gene McGillian, a broker and analyst at Tradition Energy in Stamford, Connecticut. "Conditions were right today - the market has been overdue for a bit of a correction."
Brent crude, which is used to price international varieties of oil, fell sharply as well. Brent lost US$2.87, or 2.5 percent, to US$113.79 on the ICE Futures Exchange in London.
"I think this wash out is a pretty good indication that the rally may be done, and now we're going to turn back," McGillian said.
In other energy futures trading in New York:
- Wholesale gasoline dropped 7.23 cents to US$2.9433.per gallon
- Natural gas fell 7.8 cents to US$2.865 per 1,000 cubic feet.
- Heating oil slipped 7.61 cents to US$3.1634 per gallon.
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