Oil prices plunged below $44 a barrel overnight in a matter of minutes, putting the market on edge as futures tested yet another key technical level. Traders blamed forced margin calls and computer trading for the so-called flash crash but were not quite sure what caused the drop.
At about 11:17 p.m. ET, U.S. West Texas Intermediate crude was trading at $45.36. By 11:31 p.m. ET, it had plunged 3 percent to a low of $43.76, the lowest price since Nov. 15. Futures then rebounded slightly back above $44 and stayed there for awhile until rallying back above $45 by 4 a.m. ET.
U.S. West Texas Intermediate crude futures 2-day performance
The flash crash was frightening to traders who bet on higher oil prices, "but it looks to be anomalous even in a market that is technically very weak and searching for strong fundamentals," said Tom Kloza, global head of energy analysis at Oil Price Information Service.
"So for now, it looks to be more of a brief nightmare than a template for the next couple of days," he told CNBC in an email.
Futures have plunged through a number of key levels this week. The sudden drop brought it within striking distance of another "major support zone" at $42.70, which Seaport Global Securities flagged on Thursday.
A close below $44 a barrel could trigger technical targets in the neighborhood of $40.50 a barrel, Kloza said.
John Kilduff, founding partner at energy hedge fund Again Capital, said the overnight plunge looks like forced margin-call selling. Kilduff added that he would not be surprised to hear that a hedge fund "blew up," meaning it was forced to sell its positions.
International benchmark Brent crude also extended losses overnight, dropping to $46.64 a barrel after breaking below $50 on Thursday for the first time in six weeks.