Oil price up late as traders get caught in squeeze
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NEW YORK - Crude oil rose in the last 10 minutes of trading as market participants scrambled to unwind positions on the final day of transactions for the November gasoline and heating oil contracts.
Prices climbed as traders who sold the November contracts this week, when gasoline dipped to a 21-month low, had to buy the futures back. In a squeeze, a trader goes short by selling oil, hoping the price will decline. The trader must buy back the futures in the last days before the contract expires or be forced to deliver the underlying product.
"There were a lot of traders who were squaring their books and couldn't wait," said Steve Bellino, senior vice president of energy risk management at MF Global Ltd. in New York. "I wouldn't read a lot into it because we've been seeing huge movements on expiration recently."
Crude oil for December delivery rose $1.85 to settle at $67.81 a barrel on the New York Mercantile Exchange. Futures dropped as much as $2.84 during yesterday's session. Prices, which have tumbled 54 percent since reaching a record $147.27 on July 11, gained 5.7 percent this week.
The October crude oil contract rose by a record $16.37 a barrel when it expired on Sept. 22, as traders unwound positions.
"There were people short and in the last few minutes they were forced to pay up," said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Conn.
Gasoline for November delivery declined 2.57 cents to settle at $1.4413 a gallon in New York. The November contract climbed as much as 6.3 cents in the last five minutes of floor trading. Heating oil rose 2.22 cents to settle at $2.0063.
Oil fell 33 percent in October, a record monthly decline, on signs that the economic slowdown in the United States and Europe will spread to emerging markets, curbing fuel consumption. The previous record price decline occurred in February 1986, when crude oil slipped 30 percent to $13.26 a barrel.
Rate cuts this week by the three biggest oil users, the United States, China, and Japan, failed to inspire confidence that a recession can be avoided.
"There was no news, we just had a rush of late buying because of the product expiration," said Tom Bentz, senior energy analyst at BNP Paribas in New York.
