Brent oil trading near $112, oil futures market reversing losses

Brent oil futures open today’s trading session back near $112 a barrel as oil prices start to reverse last week’s losses and analysts guess at what was the main cause for the sell off in oil.

Latest Brent Oil Price

In London, Brent crude oil futures for June 2011 delivery was trading at $111.73 a barrel, 09.20 GMT this morning on the ICE Futures Exchange.

Brent crude oil prices fell around 15 percent last week, the biggest drop since December 2008, however Brent oil is still up well over 10 percent in 2011.

One of the biggest single day declines in crude oil prices happened last week as concerns over a global economic slowdown, monetary tightening, and the end of the commodity inflation rally all helped to spark large fund and speculator selling.

But was it more to do with automated computer trading that triggered big sell orders?

Automated Computer Trading – Oil Futures

Many automated sell orders were generated by automated computer trading systems last week as oil crashed through price points that traders had programed in advance into their systems. In many cases, computer algorithms sold for technical reasons, as oil dropped through levels that, once breached, could trigger ever larger waves of selling.

The machine trading, based on subtly different but fundamentally similar, algorithmic models, eliminates human error involved in actively trading a volatile market, and increases anonymity. Instead of breeding hesitation, abrupt price drops can quickly prompt these machines to unload a bullish long position in oil, and build up a bearish short one instead.

Automated computer trading is one possible explanation for another apparent market anomaly that occurred last week. Market exchange data shows that the total number of open positions in the oil market rose, instead of falling lower.

Some of the larger traders watched their own systems sell into the down trend but couldn’t know for sure who had initiated the selling spree. They only knew that similar machines at other firms, from New York, to London, Geneva and Sao Paulo, would be automatically selling in much the same manner.

See the rest here:
Brent oil trading near $112, oil futures market reversing losses