Oil jumps to $124 on market turmoil

23 September 2008

Oil made its biggest-ever one-day price gain in New York yesterday.

Investors looking to put their money into quality assets swelled the price of a barrel of crude to $130 at one point yesterday, before it retreated to $120.92 at the close.

This is $16.37 up on the day - a marked reversal from recent weeks, where oil was steadily dropping.

The recent turmoil in the equities and bond markets are thought to have stimulated the demand, combined with what oil traders call a "short squeeze".

These squeezes can sometimes occur on deadline day for the future-traded barrels - and, yesterday, the October contract for crude expired.

Due to the price erosion in oil over recent weeks, many of the traders had taken up short positions on October's oil.

However, when the price jumped due to the financial markets' instability, these speculators were forced to go long on oil in order to hedge their positions - boosting the rise still further.

Speaking to SF Gate James Burkhard, director of global oil market analysis at the Cambridge Energy Research Associates consulting firm, commented: "We were saying earlier this year that oil's the new gold.

"It has intrinsic value, if you're in China, Russia or the United States."

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