* Oil drops $4 a barrel in a quick burst of selling * White House denies rumor of release from SPR * CFTC "looking into" oil market's tumble By Joshua Schneyer and Jeanine Prezioso Sept 17 (Reuters) - Four minutes of hectic high volume activity that sheared $4 off the price of oil late Monday left traders, analysts and U.S. regulators looking for the cause of one of the fastest and most furious energy market routs in recent years. In the absence of any major headline news that could have explained the drop, which hit both international benchmark Brent crude and U.S. oil futures, many traders and analysts speculated that the dramatic drop could have been caused by an incorrectly entered trade -- a "fat finger error" -- or a high frequency trading program gone wrong. Another potential cause -- rumors of a possible release of oil by the United States from its strategic reserve to bring down prices -- appeared to have been countered by quick government denials of such a move. Federal regulator the Commodity Futures Trading Commission (CFTC) is "looking into" the quick price drop, said commissioner Scott O'Malia, and has contacted exchange operators the CME Group and the IntercontinentalExchange Inc. ICE's front-month November Brent crude, which had opened at $116.67 a barrel, at one point plunged $5.17 a barrel to $111.50. It fell by $3.60 a barrel in a three-minute period between 1:52 p.m. EDT and 1:55 p.m. (1752-1755 GMT). From nearly one minute to the next, volume of trading spiked. Between 1:51 and 1:52 p.m. EDT, 151 lots of front-month October U.S. crude traded on the New York Mercantile Exchange, which is owned by CME Group, according to Reuters data. Three minutes later, volume spiked above 13,000 lots within a minute, more than 100 times higher than minutes before. U.S. crude futures plunged in that time, although not as sharply London's Brent market. Brent began to recover after a sharp 3-minute drop, with Brent crude settling at $113.79 a barrel, off $2.87 on the day, having dropped as low as $111.50. U.S. crude settled at $96.62 a barrel, off the low of $94.65. Volatility is common in oil trading, and headlines that suggest a significant change in oil supply balances -- whether due to refinery outages, rising oil production or falling oil demand -- can sometimes quickly move oil prices within seconds. "All of a sudden it just dropped, then it snapped right back up. Then you had 50-to-75-cent moves, so you saw guys just stay away from it. From there it was just a barrage of rumors," said John Woods president of JJ Woods & Associates, a brokerage on the floor of the New York Mercantile Exchange (NYMEX). "Everybody was asking the same thing: What the hell is going on here?" Rapid and sharp price moves over a very short period of time with no clear cause -- such as the one seen on Monday -- remain relatively rare. During intra-day trading on May 5, 2011, U.S. oil futures plunged by as much as $13 a barrel and closed down by $10 a barrel. Many traders then blamed waves of computer-driven selling by banks and hedge funds for much of the drop, in the absence of any major news that could have explained it otherwise. CME SAYS NO TECHNICAL GLITCH The CME Group said it had not experienced any technical failures and that it would not cancel any oil market trades that occurred during the price drop. The exchange said that energy markets including crude, gasoline and heating oil futures "saw a coordinated sell-off of a prolonged duration of 30 minutes" beginning around 1:50 p.m. in New York. The Intercontinental Exchange, whose ICE platform is the biggest venue for trading Brent Futures, declined comment. Traders and energy analysts offered several speculative explanations for the brusk fall, but none could immediately be substantiated, including a "fat finger" incident by a major crude trader. Reuters was not able to identify any potential culprit. Another explanation was a sell off led by algorithms programmed into super-computers, which many large hedge funds and banks use for oil trading, which could have been triggered by technical factors and then exacerbated by a lack of liquidity due to traders off for the Rosh Hashana holiday. Other potential causes for the drop were mostly dismissed. The White House said it had made no decision on whether it could release barrels from the U.S. Strategic Petroleum Reserve, a possibility that has been closely watched by traders in recent weeks, after a Gulf Coast hurricane reduced U.S. oil production and amid threats of more supply disruptions from sanctions-prone Iran. An SPR release remains an option "on the table," the White House said on Monday, but no decision has been made and it had no further announcement after crude prices fell in the afternoon. One veteran energy markets risk manager said the abrupt crude price fall in the course of just seconds in New York trading on Monday afternoon was "the fastest move I've ever seen." "I think it was too fast to be anything but HFT (high-frequency trading) or other algos (algorithmic traders). We just don't know right now, but that's my gut feeling," said John Gretzinger at INTL-FCStone in Kansas City.