Oil traders, just like those in the stockmarkets, are scrambling to react to the US Congress’s shock rejection yesterday (Monday September 29) of Treasury secretary Hank Paulson’s $700bn bailout plan for the financial sector.
Oil plunged on Monday – the West Texas Intermediate November contract opened at $106.89 on the New York Mercantile Exchange and closed more than $10 down at $96.37. This morning trading opened at $95.40.
A modified bailout plan may be devised and passed, which could help prices recover, but markets are weighing up what will happen if those attempts take a long time, or fail. Bearish and bullish forces are warring in traders minds, and at the moment the bears have the upper hand.
Alan Plaugman, head of futures and fixed income at Saxo Bank in Copenhagen, told Futures and Options Intelligence that: “A bailout might...