Oil zigzagged wildly on the futures market Friday, closing down more than $1 per barrel after a rally based on Middle East war fears ran out of steam and traders began selling. "They've taken it all over the place," said Thomas Blakeslee, an energy analyst with Pegasus Econometric Group Inc. "The market is so hungry for news, and without the rumors and news, it's come off slightly."
Light sweet crude, the key grade of oil, fell $1.24 per barrel to $33.01 for December delivery contracts on the New York Mercantile Exchange. Oil had gone to a high of $35.40 per barrel before the selloff began.
Oil had begun by moving up about $1 as speculators once again bet war was likely in the Persian Gulf. Crude then began tumbling on hints of possible diplomatic solutions to the crisis.
Traders were responding partly to a news report that Iraqi President Saddam Hussein sent a conciliatory letter to French President Francois Mitterrand, although French officials said they had no knowledge of such a letter. The market also was moved by news of Soviet diplomatic efforts in the Mideast.
Either alone or coupled with the legitimate news of the day, hearsay about the volatile Middle East has resulted in drastic swings in oil markets since Iraq invaded Kuwait on Aug. 2.
According to one of the more colorful rumors of recent weeks, the prophet Mohammed appeared to Hussein in a dream and told him to leave Kuwait.