Short Covering Leads To Record Jump In Oil

Crude oil futures contracts rose more than $25 a barrel during trading on the Nymex. Oil settled at $120.92 a barrel, up 17 percent for the day.

"Some folks got caught short," said James Williams, an economist at WTRG Economics. "The stocks at Cushing [Okla.], which is the delivery point for Nymex, will be low because they have been drawn down because of the hurricane."

So "if you are short on the last day of trading you have to either buy back the contract or make physical delivery and it is probably difficult to get spot oil at Cushing to make physical delivery," he explained.