Hedge Fund Liquidation Rumored In Oil Plunge

Sep 18 2012 | 1:00pm ET

Could a stricken hedge fund be behind yesterday's precipitous drop in oil prices?

Crude oil prices dropped by $4 dollars a barrel late yesterday in the U.S. and more than US$5 dollars in London. The declines came in just a few minutes of frenzied trading—four on the CME Group and IntercontinentalExchange and three on London's Brent market.

Rumors abounded as traders sought to discern what was behind the swoon. Some speculated that a hedge fund may have been liquidating its black gold holdings.

"There is some talk about a hedge fund liquidating positions," a Singapore investment banker told Reuters.

Even if the drop wasn't due to the thrashings of a dying hedge fund, the asset class may not be off the hook. Others speculated that a "fat finger" trading error or misfiring high-frequency trading program could be to blame.

The Commodity Futures Trading Commission is looking into the swings.


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