Oil plunges - Biggest drop in 17 years

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New York, Jul 16: Oil prices fell harder than they have in 17 years on Tuesday, July 15, as fears that record fuel prices are spreading broad economic pain exacerbated the third big sell-off in just over a week.

Light, sweet crude plunged $6.44, or 4.4 per cent, to settle at $138.74 a barrel on the New York Mercantile Exchange in an extremely volatile session. Prices at one point plummeted more than $10 from the day's high. In London, August Brent crude fell $5.17 to settle at $138.75 a barrel on the ICE Futures exchange.

Mounting concerns about the risks inflation poses to the United States, the world's biggest oil consumer, helped spark the declines. Analysts also attributed the sell-off to Thursday's expiration of options contracts, which tend to increase volatility, and to computers programmed to automatically sell once prices reach certain thresholds.

"There was this big ... selling pressure when prices dipped below $140 a barrel. It got a lot of bulls very nervous," said Tom Kloza, chief oil analyst at the Oil Price Information Service. "If it was a fire, you'd call it an accelerant."

The drop, which eclipsed last Tuesday's slide of $5.33, marked the biggest single-session decline in dollar terms since the 1991 Gulf War. Even so, prices remain no lower than they were a week ago.

Longtime market observers cautioned that the turnaround may not signal a lasting shift in sentiment - prices have swung violently in recent days as they flirted with record highs. But it does underscore investor uncertainty about the sustainability of sky-high prices and their potentially long-lasting effects on the broader economy

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