By Claudia Assis and Barbara Kollmeyer, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures fell Tuesday, ailing from a dramatic tumble in the prior session and as traders debated the cause of the fall.
Crude for October delivery CLV2 -0.62% lost 56 cents, or 0.6%, to $96.08 a barrel on the New York Mercantile Exchange.
Oil took a sharp turn lower in the last leg of floor trading on Monday, dropping more than $4 in about 20 minutes before closing down 2.4%, its lowest settlement in a week. Read: Oil ends lower on reserve-release talk.
Some had attributed the drop to speculation of a possible Strategic Petroleum Reserve release, though the White House said it had nothing to announce on the matter.
Others suggested it might have been some unusual trading activity, though the CME Group CME -0.87% , which owns Nymex, said there were no technical trading issues that caused the drop.
Some theorized the oil market was disproportionately affected by news European Central Bank Governing Council member Luc Coene said the central bank could cut its main interest rate and move its deposit rate into negative territory. See FT's Alphaville column on the slide.
Last week’s U.S. Federal Reserve’s stimulus decision started to fade and markets were having a “risk off” session, said Matt Smith, an analyst with Summit Energy, in a note to clients.
The oil tumble was an intense matter of discussion among analysts Tuesday. Commodity prices broadly fell on Tuesday, as European markets lower and U.S. stocks opening lower with the energy sector among the laggards.
Andrey Kryuchenkov, analyst at VTB Capital, dismissed SPR-release speculation as he said that possibility has been on the agenda for nearly a month.
“It does not take much to move it [oil] with volumes extremely low prior to the selloff last night and some nervous trading lately,” said Kryuchenkov in emailed answers to questions.
Brent crude UK:LCOX2 -0.17% has made three failed attempts to push above the key $117 level, while oil overall had been running strong for six sessions ahead of Monday’s drop, he said.
Brent oil, Europe’s benchmark, led the selloff on Monday. A day later, the November contract declined 4 cents, to $113.76 a barrel on ICE Futures in London and paring some of its early losses. The ICE said it had no comment on Monday’s sharp move lower.
Analysts at JBC Energy Research Centre said in a note Tuesday that the fact that a selloff occurred for both Nymex crude and Brent “implies that this was no technical glitch, but rather a profit-taking strategy by major market participants that were worried about a price correction.”
Investors were asking whether the Federal Reserve’s program was going to be enough, and how long it would take to have any effect on the U.S. economy, they added.
Other energy futures were mixed on Tuesday, with heating oil for October HOV2 -0.21% off less than 1 cent to $3.16 a gallon. October gasoline RBV2 -0.01% was flat at $2.94 a gallon.
Natural gas for October delivery NGV12 +0.24% rose less than 1 cent, or 0.1%, to $2.87 per million thermal units.
Claudia Assis is a San Francisco-based reporter for MarketWatch.
Barbara Kollmeyer is an editor for MarketWatch in Madrid.
