Was "Oil Leak" Culprit in Crude Market Tumble?

  • 19 Sep 2012
  • By Craig Pirrong
  • Topics: Energy

Don't Point "Fat Finger" in This Case, Economist Says

The steep drop in crude oil prices earlier this week stirred consternation among traders and market regulators, with some theorizing it was caused by a "runaway" algorithm or "fat finger" order entry mistake.

Rather, the selloff probably was linked to someone who received an early tip on news that Saudi Arabia plans to increase crude production, economist Craig Pirrong wrote on his "Streetwise Professor" blog.

The most likely explanation is that the announcement was leaked," Pirrong wrote. "In my opinion this was the result of an 'oil leak' - somebody spilled the news of the Saudi decision."

Pirrong is a Professor of Finance and Energy Markets Director of the Global Energy Management Institute at the Bauer College of Business at the University of Houston.

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