"The bulls are stubborn," said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. "They're thinking this is the last big buying opportunity before the end of the year."
West Texas Intermediate crude, the U.S. benchmark, retreated $1.88 a barrel, or 1.9 percent, to $95.29 on the New York Mercantile Exchange in the week covered by the report, then slid another 2.5 percent to settle at $92.89 on Sept. 21. The contract extended losses today, dropping 1.3 percent to $91.71 a barrel at 9:33 a.m.
Oil rose 1.3 percent on Sept 13 after Fed Chairman Ben S. Bernanke said that the central bank will buy up to $40 billion in mortgage-backed securities a month in an effort to bolster the economy and reduce unemployment, which has remained above 8 percent for 43 months.
The Fed's previous rounds of growth-boosting measures weakened the U.S. dollar and made commodity investments more attractive. QE2 began Nov. 3, 2010, and by April 29, 2011, crude had reached $113.93, the highest level since Sept. 22, 2008.
"It's extremely bullish for oil in the long run," Stephen Schork, president of Schork Group Inc., a consulting firm in Villanova, Pennsylvania, said by phone Sept. 21. "We're seeing inflation expectations really picking up. We're debasing the dollar. That's going to continue to attract investors and Wall Street into hard assets."
Oil began a four-day slide Sept. 17, with futures falling $3 in less than a minute that day, as October options neared expiration, and settled at $96.62.
The fuel slipped again on Sept. 18, retreating 1.4 percent, on speculation that Saudi Arabia may increase output to lower prices and FedEx Corp., the world's biggest cargo airline, reduced its profit outlook, a sign that a slowdown in economic growth may curb demand.
Oil tumbled 3.5 percent to $91.98 a barrel on Sept. 19 after the Energy Department reported that stockpiles gained 8.53 million barrels to 367.6 million. Analysts surveyed by Bloomberg predicted an advance of 1 million.
Futures settled at $91.87 Sept. 20 following signs that U.S. economic growth is stalling. Jobless claims decreased by 3,000 in the week ended Sept. 15 to 382,000, the Labor Department reported. The median forecast of 49 analysts surveyed by Bloomberg projected a drop to 375,000.
"The speculators have been buying on the way down and hanging on," Flynn said by phone Sept. 21. "A lot of people are looking at what's happening in the Middle East and looking at QE3, and they're not believing the bearish case."
The U.S. and Europe tightened sanctions against Iran this year to derail the country's nuclear program, raising speculation that shipping may be disrupted in the Strait of Hormuz, a waterway on the Islamic nation's coast through which about 20 percent of the world's crude passes.
The restrictions have impeded Iran's ability to export oil. Output has declined 23 percent this year through August, according to data compiled by Bloomberg.
Violent protests in Libya, including a Sept. 11 attack that killed a U.S. ambassador and three of his colleagues, has also spurred supply concern. The country's production declined 56 percent last year as civil war shut ports and oil fields.
Oil rose 1.1 percent on Sept. 21, the first increase in five days, on signs that European leaders are nearing resolution of the region's three-year-old sovereign debt crisis.
"You can think of the recovery in prices as something of a counterattack and an attempt to assert that it's still a bull market," said Tim Evans, an energy analyst at Citi Futures Perspective in New York.
Net-long positions in WTI oil held by money managers, including hedge funds, commodity pools and commodity trading advisers, rose by 11,323 futures and options combined to 214,647 in the seven days ended Sept. 18.
"There's an old saying that goes, 'If the wind is strong enough, even a turkey can fly,'" Evans said by phone Sept. 21. "Even if oil is something of a turkey when it comes to the physical side of things, it can still head higher if there's enough buying out there to drive it."
In other markets, money managers increased bullish bets on higher U.S. gasoline prices for a seventh consecutive week. Net- long positions gained 2,274, or 3 percent, to 78,140. Gasoline declined 4.7 percent in the week covered by the report to $2.899 a gallon, and settled at $2.9425 in New York on Sept. 21. Futures fell to $2.9208 today in New York.
Regular gasoline at the pump, averaged nationwide, cost $3.808 a gallon yesterday, according to data from Heathrow, Florida-based AAA, the largest U.S. motoring group.
Money managers raised bets on U.S. heating oil, a proxy for diesel. Net-long wagers advanced 1,462 futures and options combined, or 6 percent, to 25,753, the CFTC report showed. The fuel declined 1.8 percent to $3.1271 a gallon in the report week, and settled at $3.1207 on Sept. 21. The contract fell 0.7 percent to $3.0989 today.
Net-long bets on four U.S. natural gas contracts dropped for the eighth straight week, falling by 13,629 futures equivalents, or 14 percent, to 82,714, CFTC data show. Natural gas lost 21.9 cents, or 7.3 percent, on the Nymex in the report week, retreating to $2.773 per million British thermal units, and settled at $2.885 Sept. 21. The fuel fell 1.9 percent today to $2.829.
The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swaps, Nymex Henry Hub Penultimate Swaps and ICE Henry Hub Swaps. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.