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Oil prices hit steep plunge yesterday

Oil containers and railroad cars sit in Hurricane Isaac's flood waters on August 31, 2012 in Braithwaite, La.

Federal regulators are looking into something strange that happened yesterday in the oil markets: Prices plunged more than $3 a barrel in less than a minute.

"We know what happened wasn't due to any major news event," Marketplace's Stephen Beard points out. But it is hard to find alternative reasons for the plunge as well. One theory, he says, is so-called "fat-finger syndrome" -- otherwise known as human error.

"Error is a possibility," says Nick McGregor of brokers Redmayne-Bentley, "but it would have to be a very significant error to have seen the volume which we saw in this contract -- nearly double in the course of a couple of hours."

Some analysts in the U.S. say it must have been high-frequency trading, adds Beard.

 

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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