Oil Plunges Record $5 in Panic Selling

The price of oil plunged more than $5 a barrel in hectic and panicky New York trading today, the biggest one-day fall in the history of the exchange.

As crude oil prices tumbled, gasoline and heating oil prices also went into a tailspin.

“We need crash helmets today,” said one broker, as oil broke through the important benchmark of $30.

The dizzying fall brought the November oil delivery down $5.41 to $28.38 a barrel at the close.

The drop of 16% in price of oil--an economically powerful commodity--was equivalent to a setback of 402 points in the Dow Jones stock average.

The exchange said that the market had posted its biggest drop since crude began trading in 1983. The previous biggest one-day fall was $4 on Aug. 27.

Product prices also plunged, with gasoline for November delivery closing down 11.41 at 76.50 cents a gallon and heating oil off 12.42 cents to 75.98 cents a gallon.

This slide added to last week’s loss of $6 on mounting hopes a diplomatic resolution to the Persian Gulf crisis could be in sight.

Traders said players appeared to be focusing more on fundamentals of supply and demand in the absence of the war rhetoric that has shaped trading in recent weeks.

“Product prices are coming down on fundamentals of supply and demand, and so are crude prices,” said Nauman Barakat, vice president at Merrill Lynch Futures.

Oil prices have given up about half of their advance since the start of an explosive rally Aug. 2 on Iraq’s invasion of Kuwait. The day before the invasion, oil hovered at $21 and on Oct. 10, it peaked at a record high of $41.15 a barrel.

“There’s happy diplomatic progress in the Gulf and now the situation is coming together,” said George Nickas of Geldermann Inc.

Some traders were betting that oil could be headed even lower.