Quick Oil Drop, When SPR Speculation Turns into Rumors


What happens when too many market pundits start to talk about a possibility? Usually, it becomes a market rumor. Active traders (and penny-pinching consumers) have noticed that speculation about the administration's possible release of oil which is held under the Strategic Petroleum Reserves. Apparently, they did more than notice it if you saw the sharp and sudden drop in oil prices today. Fox Business News talked this up today and it hosted James McDonnell of Avalon Energy, but he said that there are not really any strategic reasons to tap the reserves as of now. While the White House has said that tapping the SPR remains an option, McDonnell made the comment that the SPR is supposed to be for strategic purposes rather than political gains purposes.

A move today around 1:45 PM EST sent oil down in the tank for nearly a 3% drop. The United States Oil (NYSEMKT: USO) exchange-traded product is still down almost 3% at $35.75 on the day and is now lower than before QE3 was announced. The sudden drop has only marginally hit the oil and gas service companies as the key Market Vectors Oil Services ETF (NYSEMKT: OIH) is down 0.9% at $42.93 on the day.

CNBC's Kate Kelly discussed that the chatter had grown even last week and noted that $120 per barrel of oil on Brent may be the magic number that forces the release of SPR.

Bloomberg ran a piece even ten days ago which cited Stephen Schork of the Schork Report calling for a higher chance of an SPR release.


Filed under: 24/7 Wall St. Wire, Active Trader, Commodities & Metals, Oil & Gas Tagged: OIH, USO