Oil prices reverse late in session as heating oil contract plunges | Reuters

Oil prices reverse late in session as heating oil contract plunges | Reuters

Oil prices fell on Friday, reversing in volatile trade, pulled downward by the U.S. heating oil contract that plummeted by more than 20% at one point on the day of its expiration.

The front-month U.S. heating oil contract , which is a proxy for diesel prices, soared to a record high of $5.8595 a gallon before falling as low as $4.4067 a gallon. Diesel futures have climbed as investors worry about tight supplies globally following Russia's invasion of Ukraine.

The heating oil contract expired on Friday, along with the global Brent benchmark and U.S. gasoline futures . Volumes in all three front-month contracts was low, creating outsized volatility in the market and leading to late-day sell-offs, analysts said.

"The fireworks were all in the expiring diesel contract," said Andrew Lipow of Lipow Oil Associates in Houston. "Today's expiry is especially volatile and may not be reflective of actual tightness."

The more-active second-month Brent crude futures contract fell 12 cents to settle at $107.14 a barrel. The expiring front-month contract rose $1.75 to settle at $109.34 a barrel.

U.S. West Texas Intermediate crude , which does not expire on Friday, fell 67 cents to settle at $104.69 a barrel, as traders sold energy contracts across the board.

The front-month heating oil contract's volatility was not mirrored in the more-active second-month U.S. heating oil contract , which gained $0.0088 a gallon to settle at $4.0172 a gallon.

Both Brent and WTI rose for the week and posted their fifth straight monthly gain. Brent ended the month up 1.3%, while WTI ended up 4.4%.