Oil Prices Collapse in Frantic Trading : Optimism: Early triumph and hope of a short war caused prices to plunge on the New York Mercantile Exchange.

Crude oil prices collapsed in their biggest one-day fall in history today after war with Iraq broke out overnight and initially triumphant U.S. combat reports erased fears of supply disruptions.

Prices plunged by more than $10 a barrel in frantic trading on the New York Mercantile Exchange, an astonishing drop that left many market professionals dazed.

With less than a half hour left to trade this afternoon, light sweet crude oil for delivery in February fell to $21.70, which was 40 cents cheaper than oil’s closing price on Aug. 1, the day before Iraq invaded Kuwait.

The outbreak in the Persian Gulf had long been seen as a spark for dramatically higher prices. But it had the opposite effect when the first U.S.-led air strikes on Iraq appeared successful, raising prospects of a short war that would free the world from the threat that Mideast oil facilities could be destroyed.

Crude prices tumbled around the world.

At the opening of trading on the New York Mercantile Exchange, traders tried to sell oil for $24.50 a barrel, $7.50 below Wednesday’s close of $32, but no one would buy.

That was a record move and triggered an emergency one-hour halt in trading under new rules intended to ensure orderly trading, the first time the limit has been imposed.

Oil’s previous record one-day move on the Mercantile Exchange came on Oct. 22, when crude fell $5.41 per barrel on an unfounded peace rumor.

When trading in New York was resumed shortly after 11 a.m., crude prices immediately fell again. On Wednesday, oil had closed $1.93 higher at $32 a barrel.

The day before the invasion of Kuwait, oil had closed at $22.10 a barrel in New York, and in the weeks afterward, it rose to a high of $41.15.

In London today, oil prices fell below $20 a barrel, also cheaper than before the Iraqi invasion of Kuwait on Aug. 2.

Many oil traders were shocked to see oil prices take such a steep fall after the outbreak of war. For months, experts had predicted prices jumping wildly, perhaps even as high as $60 or $100 per barrel, once the shooting started.