From Forbes: A mysterious and violent movement in crude oil
prices has traders scratching their heads in disbelief. Over the course of a few minutes, WTI and
Brent crude, the two main global price benchmarks, dropped more than $3 per
barrel each, the most in eight weeks, as volumes surged in what had been a
slow, low liquidity session. Talk of a
“fat finger” or an impending release of petroleum reserves from the Obama
Administration has been thrown around, but traders suspect there’s more to this
move.
Several factors seemed to conspire to make Monday’s violent
plunge in crude oil more difficult to decipher.
October WTI contracts plunged from $97.88 to $94.83 in one minute,
exactly at 1:54 PM in New York, according to data from Bloomberg. Brent followed a similar trajectory, falling
from above $115 a barrel to as low as $111.50 in a matter of minutes. Incredibly, there wasn’t a single headline
the move could be pegged to.
Amid low volume given the Jewish holiday of Rosha Hashanah
(it had averaged 300,000 contracts before 1:50 PM, while daily averagesover
last three months stood at 536,000) and the expiration of options, the sudden
move caught traders off guard. “13,000
contracts won’t move the market five bucks,” explained Matt Cacciotti, MMC
Trading’s president and head trader, who works at the floor of the NYMEX. “I have a hard time believing it’s a straight
trade....”
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