NEW YORK -- Oil plunged more than $4
per barrel in a short time Monday afternoon, erasing the gains made last
week when the Federal Reserve unveiled new steps to boost the U.S.
economy.
Benchmark crude fell $2.38, or 2.4%,
to finish at $96.62 on the New York Mercantile Exchange. It was the
biggest percentage decline since July 23. Oil dropped below $95 per
barrel during the rapid sell-off before recovering a bit.
Traders
were unsure of the cause of Monday'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 Strategic Petroleum
Reserve 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% last week, with most
of the gains coming after the U.S. 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 $100 briefly on Friday, its highest point in four months. It held to slight gains above $99 for most of Monday.
"Sometimes
the market is slow to react," said Gene McGillian, a broker and analyst
at Tradition Energy in Stamford, Conn. "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 $2.87, or 2.5%, to $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 futures trading in New York:
-- Wholesale gasoline dropped 7.23 cents to $2.9433.per gallon
-- Natural gas fell 7.8 cents to $2.865 per 1,000 cubic feet.
-- Heating oil slipped 7.61 cents to $3.1634 per gallon.
Associated Pres