Oil nosedives on EU debt crisis, hedge fund positions

5 February 2010

Written by Bob Burton

Crude oil prices registered their biggest one-day drop seen since July 2009 during trading on the New York Mercantile Exchange yesterday, while heating oil prices also nosedived.

The downward slump came as concerns about Greece's spiralling debt burden spread to Spain and Portugal, where weakness in the housing market is becoming a major concern.

Speaking to Reuters, analysts claimed that the drop seen in crude was also influenced by an unnamed hedge fund's decision sell off large volumes of crude very quickly.

"If my fund had cash trouble and I needed the money, I would sell whatever I can," commented Clarence Chu, an energy trader at Hudson Capital Energy in Singapore.

By the close of trading yesterday, crude prices had slipped to $73.14 (£46.50) a barrel, down $3.84. Meanwhile, heating oil dropped more than eight cents to settle at $1.93 a gallon.

Although both commodities started strongly this morning, further falls were witnessed as European markets opened.

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