Oil prices plunge after last week's bump

Oil prices bobbed above $97 per barrel and then retreated on Tuesday, a day after prices unexpectedly took a plunge. The drop in oil prices erased the gains made last week when the Federal Reserve unveiled new steps to boost the US economy.

Steven Senne/AP
Sign worker Ray Messore, of Glocester, R.I., works on a sign next to one where gasoline prices are posted at a gas station in Pawtucket, R.I., Monday, Sept. 17, 2012. Oil prices plunged in Asia Monday, erasing gains made last week.

 Oil bobbed above $97 and then retreated in Asia on Tuesday, a day after prices unexpectedly took a plunge.

Benchmark crude for October delivery was down 11 cents at $96.51 a barrel at late afternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contract fell $2.38, or 2.4 percent, to finish at $96.62 a barrel on the Nymex on Monday.

On Monday afternoon in the U.S., oil suddenly plunged more than $4 per barrel, erasing the gains made last week when the Federal Reserve unveiled new steps to boost the U.S. economy.

Traders were initially unsure of the cause of the plunge. Some wondered whether an errant trade or another rumor about a release of oil from the Strategic Petroleum Reserve was to blame. NYMEX operator CME Group said there were no technical glitches to explain the drop.

Oil analyst Stephen Schork said volatility arising from the expiration of October options contracts could have been exaggerated by the lower trading volume that occurred Monday due to the observance of a Jewish holiday.

"Any time you take a significant segment out of the market, liquidity does dry up," Schork said, "and you can get moves like this."

Oil rose 2.7 percent 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.

Brent was down 9 cents at $113.70 a barrel on the ICE futures exchange in London.

In other energy futures trading on the Nymex, wholesale gasoline rose 0.3 cent to $2.863 per gallon. Natural gas rose 0.8 cent to $2.873 per 1,000 cubic feet. Heating oil added 0.3 cent to $3.17 per gallon.

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