The price of oil just went up because traders misread a tweet

October 10, 2013

This month marks the 40th anniversary of the October War, in which Egypt and Syria launched a surprise attack against Israel but were defeated. The official Twitter account for the Israeli Defense Forces has been tweeting out moments from the war, including this one from a few hours ago, which some very jumpy oil traders mistook as describing a real-time current event:

You don't have to scrutinize all 140 characters super closely to realize the tweet is describing an event from four decades ago. The tweet is marked with the date October 10, 1973, (although, to be fair, the '73 is part of a hashtag, which are easy to skip over) and includes a reference to the Soviet Union, which collapsed 22 years ago.

Still, oil traders took the tweet as current, according to Reuters, which drove up oil prices by about $1 per barrel, from $110.40 to $111.50. Apparently, traders who saw the tweet (the ubiquitous Bloomberg financial terminals sometimes carry tweets) believed that Israel had just bombed Syrian airports. That developed into rumors, which led traders to worry that the supply of oil was about to become more expensive, so they started buying more oil in anticipation of a price spike, thus causing an actual spike in prices despite the fact that nothing had happened.

Here's my favorite detail from the story. Reuters reports: "Although traders quickly realized the historical nature of the Tweet, oil prices maintained their gains." Oil prices actually ended up going even higher, to $111.74 per barrel, the most expensive it's been all month. The story says this is partly because of optimism that the United States would avoid default and that Libya's political turmoil may not be as bad as it earlier looked.

The 1973 October War is also known as the Yom Kippur War in Israel and the Ramadan War in Arab countries. Though Israel won the war, Egyptians still celebrate its anniversary every year, citing some battle victories by Egyptian forces. The war also led to the U.S.-brokered Camp David peace accords between Israel and Egypt, one condition of which was that the United States would pay Egypt over $1 billion every year in direct military aid. This week U.S. officials announced that the United States would cut that aid by hundreds of millions of dollars.

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Max Fisher · October 10, 2013