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Oil jumps $16 a barrel in one day!

While traders were even amazed to see the price of oil jump to $121 a barrel overnight, what chance do the general public have of understanding what is going on!

After being more than $20 a barrel up at one stage the price of oil settled to close at $121 which was the highest rise since 1984 and caught many traders on the hop. There were a few factors which led to the rise but none can explain away the sudden demand which was seen through the markets :-

Weaker dollar

The price of oil (quoted in dollars) was pushed higher as the US currency came under renewed pressure after a good run of late in the currency markets.

Hopes for an economic recovery

The much covered US bail out seems to be making steady progress through Congress which buoyed many traders looking for a worldwide economic recovery in 2009.

Traders closing positions

While this was more of a technical situation than anything sinister, many traders were looking to close their October positions and open new positions on the oil futures market.

At the moment there is no real concern that this marks a possible return to the old days of a sky high oil price and renewed pressure on inflation, but do keep an eye on the situation.

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