Oil, ETFs Spike As Investors’ Nerves Frayed By Fed’s Plan

September 22nd at 2:00pm by Tom Lydon

Bailout anxiety today led to the biggest one-day spike in the price of oil as the dollar weakened and crude futures contracts expired.

Oil jumped by $25 a barrel, which more than shattered the previous record one-day price jump of $10.75, reports the Associated Press. As a result of the jump, the Nymex halted electronic crude oil trading after prices surpassed the $10 daily trading limit. Trading resumed a few seconds later after the limit was raised.

The price finally settled at $120.92, a gain of $16.37 for the day.

Energy traders are grappling with the implications of the government’s proposed initiative to calm the U.S. financial crisis by absorbing $700 billion in bad debt. Investors fear that the government will have to raise borrowing to pay for the bailout, which could weaken the dollar further and trigger another round of safe-haven buying in commodities and the like.

Oil-focused ETFs rose sharply today:

  • United States Oil (USO), up 15.1% year-to-date
  • United States 12-Month Oil (USL), up 19.2% year-to-date
  • iPath S&P GSCI Crude Oil Total Return Index (OIL), up 14.5% year-to-date

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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