The price of oil slipped below $96 a barrel on Tuesday, adding to losses from the previous day, when prices took a sudden and unexplained plunge.
By early afternoon in Europe, benchmark crude for October delivery was down 82 cents at $95.80 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.38, or 2.4 percent, to finish at $96.62 a barrel on the Nymex on Monday.
In London, Brent was down 40 cents at $113.39 a barrel on the ICE Futures exchange.
On Monday afternoon in the U.S., oil suddenly plunged more than $4 per barrel in both New York and London, erasing the gains made last week when the Federal Reserve unveiled new steps to boost the U.S. economy.
Traders were unsure of the cause of the plunge. Some wondered whether an errant trade or another rumor about a release of oil from the Strategic Petroleum Reserve was to blame. NYMEX operator CME Group said there were no technical glitches to explain the drop.
Oil analyst Stephen Schork said volatility arising from the expiration of October options contracts could have been exaggerated by the lower trading volume that occurred Monday due to the observance of a Jewish holiday.
"Any time you take a significant segment out of the market, liquidity does dry up," Schork said, "and you can get moves like this."
Others said that concerns over a drop in prices spurred speculative decisions.
"The fact that the sell-off occurred on both exchanges implies that this was no technical glitch, but rather a profit-taking strategy by major market participants that were worried about a price correction," said analysts at JBC Energy in Vienna, noting that the recent "surge in crude prices was more based on expectations than fundamentals."
Oil rose 2.7 percent last week, with most of the gains coming after the U.S. central bank announced a plan aimed at lowering long-term interest rates and boosting hiring. The gains came even as some experts questioned how much the Fed's moves would actually help the economy.
Investors will later be monitoring fresh information on U.S. stockpiles of crude and refined products.
Data for the week ending July 6 is expected to show builds of 2.5 million barrels in crude oil stocks and 1 million barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department's Energy Information Administration — the market benchmark — will be out on Wednesday.
In other energy futures trading on the Nymex, wholesale gasoline fell 0.22 cent to $2.8574 per gallon. Natural gas lost 2.2 cents to $2.843 per 1,000 cubic feet. Heating oil declined 0.49 cent to $3.1585 per gallon.
Pamela Sampson in Bangkok contributed to this report.
- New York Mercantile Exchange