Oil surges nine per cent on Citigroup bailout

25/11/2008

Oil prices rose dramatically during trading yesterday (November 24th) following the confirmation that $306 billion (£202.6 billion) in Citigroup assets will be secured by the US government.

At the close of trading yesterday on the New York Mercantile Exchange, light-sweet crude for January delivery had surged 9.2 per cent, settling at $54.50 a barrel.

Such increases may in turn have an inflationary effect on wholesale heating oil prices, in addition to DERV and residual fuels.

"The Citibank bailout has changed the face of everything. There's a hope that credit will now free up and people will make purchases," said Phil Flynn, senior trader at Alaron Trading, speaking to Bloomberg.

Earlier in the day, the commodity had dropped below $50 a barrel, with many corners concerned that prices could fall further.

Reuters noted that the surge later on was also fuelled by speculation that the Organisation of the Petroleum Exporting Countries would limit oil supply further at its next meeting.