Crude Tumbles 2.4% in Sharp, Late-Session Drop

U.S. crude futures took a violent tumble Monday, dropping more than $3 in less than a minute on a huge spike in trading volume, shaking broader markets and sparking confusion across trading floors.

At 1:54 p.m. EDT, light, sweet crude for October delivery plummeted to a low of $94.83 a barrel on the New York Mercantile Exchange after trading above $98 a barrel throughout the session. Volume surged to more than 12,500 contracts in a minute, after trading near 100 contracts for most of the session.

The decline took investors by surprise across markets, leading to sharp drops in stocks, the euro and other commodities. CME Group Inc. (CME) said there were no technical trading issues involved in the selloff, and the lack of a discernable reason for the decline sent traders scrambling to the phones looking for answers.

"Traders were looking like deer in the headlights," said Peter Donovan, a Nymex floor trader at Vantage Trading. "It was just confusion as traders were scrambling. I called four different desks, and they all said, 'we don't know.'"

U.S. crude futures pared some losses to settle $2.38, or 2.4%, lower at $96.62 a barrel, the lowest in a week. Brent crude on the ICE futures exchange settled $2.87 lower at $113.79 a barrel.

The sharp slump comes amid growing jitters among analysts, traders and other market watchers, fearful that renewed turmoil in the Middle East, particularly surrounding Israel and Iran, could quickly lead to big moves in the oil pits.

"The market is just showing its vulnerability. We've got a $10 to $15 premium just on Iran, so the market is susceptible to just come off," said Tony Rosado, a broker at Dorado Energy Services.

Gen. Mohamad Ali Jafari, head of Iran's Revolutionary Guard Corps., said Sunday if Iran was attacked, the country would retaliate against U.S. bases in the Middle East and Israel, and aim to disrupt oil shipments through the Strait of Hormuz, according to Agence-France Presse.

Meanwhile, on Sunday Israeli Prime Minister Benjamin Netanyahu called for the U.S. to establish a "red line" on Iran's nuclear program that would result in a military response.

Conversely, the potential for a release of strategic stockpiles by the U.S. to combat high prices has raised fears of sharp declines. On Monday, rumors quickly circulated that a strategic release was behind the sharp slump. But a White House official said the administration currently has no plan to release oil from the 700-million-barrel Strategic Petroleum Reserve.

"As we have made clear, all options remain on the table, but we have nothing to announce at this time," the official said.

Front-month October reformulated gasoline blendstock, or RBOB, settled 2.4% lower at $2.9433 a gallon. October heating oil dropped 2.4% to $3.1634 a gallon.

Copyright (c) 2012 Dow Jones & Company, Inc.


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PAT KENMIr | Sep. 18, 2012
I was positive something was coming like this and if I was Mitt, I would be telling my followers that this is exactly what I would be doing the day after I was elected as President of the United States of America. I would release 250 million barrels, or more of Srategic Petroleum Reserve crude onto the market at a REDUCED PRICE to get the SPECULATOR Traders out of the Futures Market to get the oil price back down to around $ 75.00 a barrel. I would also forget about Irans Nuclear ambitions, as they are someday going to get a Nuclear device, whether we the United States likes it or not. They have enough oil money to do it. The only reason they are playing this threatening game right now is, it is keeping the price of oil that they sell to the world, HIGH. It is EXACTLY, what they want and the US is playing right into their big oil game like little chickens. It is funny to watch! IF the U.S. pulled every Military thing out of the Straits and said forget it all, let them do what they want. What do you think would happen? First of all, the Futures price of oil around the world would drop into the $ 70.00 range. Second, Isreal would of course scream bloody murder, but they would calm down as soon as they understand we woud not abandon them. We would also have to tell them to leave Iran alone too, as long as Iran left them alone as well. Nobody is going to mess with anybodys oil fields as oil is too precious a comodity today to just up and destroy because then the other guys oil fields get destroyed too. The U.S. IS is NOT going to WAR with Iran ever! NOT GOING TO HAPPEN! The US is not stupid anymore and we got rid of the stupids we had in charge last time and they aint coming back!


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Brent Crude Oil : $48.06/BBL 2.51%
Light Crude Oil : $45.77/BBL 2.17%
Natural Gas : $2.97/MMBtu 2.30%
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