Oil prices spiked more than $25 a barrel today — the biggest one-day price jump ever — as anxiety over the government's $700...
NEW YORK — Oil prices spiked more than $25 a barrel today — the biggest one-day price jump ever — as anxiety over the government’s $700 billion bailout plan, a weak dollar and an expiring crude contract ignited a dramatic rally.
Light, sweet crude for October delivery jumped as much as $25.45 to $130 a barrel on the New York Mercantile Exchange before falling back to settle at $120.92, up $16.37. The contract expired at the end of the day, adding to the volatility as traders rushed to cover positions; the October price began accelerating sharply in the last hour of regular trading, a common occurrence when a contract is about to go off the board.
Still, the rally, which shattered crude’s previous one-day price jump of $10.75, set June 6, showed the intensity of emotion in the market. The Nymex temporarily halted electronic crude oil trading after prices breached the $10 daily trading limit. Trading resumed seconds later after the daily limit was increased.
The November crude contract, which became the front-month contract at the end of Monday’s session, was trading at $108.69, up $5.94, still a sharp gain.
Most Read Business Stories
- Amazon sued by Black cloud-computing manager over alleged racial discrimination and sexual harassment
- The penthouse atop Smith Tower is on the rental market for the first time
- Costco, Whole Foods rise in Greenpeace rankings of grocery chains' plastic use
- Screening to detect prior coronavirus infections launched by Adaptive Biotech, with Microsoft's help
- Downtowns will be back, but Seattle has choices to make
In other trading, gold prices shot up more than $44.30 to settle at $909 an ounce, and other safe-haven commodities also rallied, underscoring investors’ uncertainly about the direction of the economy and their fear of more turmoil ahead.
“We’re off to the races again,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill. “There’s a renewed scramble for commodities because of a general weakness in the dollar.”
Crude has gained about $30 in a dramatic four-day rally that has at least temporarily halted oil’s steep two-month slide below $100. At this rate, crude is within striking distance of its record of $147.27, reached in July.
Oil’s sharp gains came as energy traders grappled with the implications of the government’s proposed $700 billion initiative to stem the U.S. financial crisis by absorbing billions of dollars of banks’ bad mortgage-related securities. Anxiety over the plan also sent stocks sharply lower today; the credit markets were calmer than they were last week, but still showing the effects of investors’ nervousness.
“They’re going to have to continue auctioning off a whole lot of Treasurys to finance these projects, so the dollar is going to suffer,” said Matt Zeman, head trader at LaSalle Futures in Chicago. “Right now it’s fear and anxiety driving people who want tangible assets.
The 15-nation euro rose to $1.4807 in afternoon trading, up from the $1.4470 on Friday. A weak greenback was a catalyst for the commodities boom of the past year, and analysts said large investment funds were expected to pour money back into the sector.
“That trade was very successful in the past, so if the dollar keeps weakening, a lot of people are going to want to own hard assets like crude,” said Andrew Lebow, senior vice president and broker at MF Global in New York.
But there is still much uncertainty about what impact the U.S. rescue plan will have on energy demand. Oil’s run-up near $150 a barrel in July and a weak U.S. economy has forced Americans to cut back on their driving and led business to scale down operations. Though pump prices have eased from record levels above $4 a gallon, they remain expensive, and more softening in the economy would likely further curtail energy use in the world’s thirstiest consumer.
“There are a lot of issues to be filled in. It’s an extraordinarily complex situation,” said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. “The market is digesting how the (rescue) package will work and the implications for the U.S. economy.”
Associated Press writers Louise Watt in London and Alex Kennedy in Singapore contributed to this report.