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Crude prices surge over 20% on weak dollar, short squeeze
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08:30, September 23, 2008

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· Surge in Oil Prices
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Crude prices soared over 20 percent Monday, the biggest ever one-day gain on record, on short squeeze and concerns about the outlook of the U.S. dollar.

Light, sweet crude for October delivery, which expires Monday, was up 16.37 dollars to settle at 120.92 dollars a barrel, after rising as high as of 130.00 dollars per barrel on the New York Mercantile Exchange.

"The fact that oil experienced its biggest one day price spike ever has to do with a short squeeze of massive proportions taking place," Wall Street Strategies' senior research analyst Conley Turner told Xinhua.

"In fact, the approximately 20 percent move suggests that some institutions is on the hook for making a wrong bet on the direction of the commodity and massive unwinding is taking place," added the analyst.

Crude prices had tumbled from record highs of 147.27 dollars a barrel, which was set on July 11, weighed down by growing evidence that high energy costs and economic woes were curbing global demand.

Investors' concerns about the outlook of the U.S. currency also push the prices higher.

The U.S. dollar fell sharply Monday as concerns grew that Treasury Secretary Henry Paulson's 700-billion-dollar rescue plan will further burden U.S. finances.

The new rescue plan would increase the public debt limit to 11.3 trillion dollars from 10.6 trillion dollars. The jump in federal debt would be negative for the dollar.

The U.S. dollar was lower against other major currencies Monday. In Europe, the euro traded at 1.4689, up from 1.4470 late Friday in New York.

"It is clear that the U.S. dollar had peaked in value some days ago and is now falling. Oil traders are pumping money into the commodity as the trade of choice now is to sell dollars and buy oil," said Turner.

In London, Brent North Sea crude for November climbed 6.43 dollars to settle at 106.04 dollars a barrel.


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