Oil prices dipped in Asia on Monday, retreating from a record surge late last week, and traders said the market would remain choppy amid jitters about supplies, growing global demand and a weakening dollar.
Crude futures made their biggest single-day leap ever Friday, soaring nearly US$11 for the day to US$138.54 a barrel, a rise of more than 8 percent that battered Wall Street. That came after an increase Thursday of almost US$5.50, taking oil futures more than 13 percent higher in just two days, easily a record on the New York Mercantile Exchange.
Midday in Singapore, light, sweet crude for July delivery was down 79 cents to US$137.75 a barrel. In after-hours trading Friday, the contract rose as high as US$139.12.
"We're likely to see some pullback," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "It's likely that we're going to see a choppy period of ups and downs."
So far, there has been little sign of weakening demand for crude oil, despite the slowdown in the U.S. and moves by India, Malaysia and other Asian countries to cut subsidies on gasoline, effectively raising retail prices.
It will take some months to see data showing a decline in demand, Shum said. "As we go deeper into U.S. summer driving season, we may see demand drop, and that could help pull back pricing."
But he pointed out that in China, a huge driver of oil demand in Asia, authorities have refrained from raising state-set retail prices in recent months, suggesting that demand may not be affected by the surge in global oil prices.
Friday's jump came after Morgan Stanley analyst Ole Slorer predicted that strong demand in Asia and tight supplies in the Western Hemisphere could drive prices to a once-unthinkable US$150 by early July.
Asian markets sank Monday, tracking Friday's declines on Wall Street, when the Dow Jones industrial average plunged 394.64 points, more than 3 percent, to close at 12,209.81 _ its biggest drop in more than 15 months in both percentage and points terms. Japan's Nikkei 225 index was down 1.7 percent by midday.
Traders also were unnerved by remarks from an Israeli Cabinet minister who was quoted as saying his country would attack Iran if it doesn't abandon its nuclear program. Transportation Minister Shaul Mofaz said Iranian President Mahmoud Ahmadinejad "will disappear before Israel does," the Yediot Ahronot daily reported.
Iran is the second-biggest oil producer in the Organization of Petroleum Exporting Countries, and traders worry that any conflict with Israel could disrupt global supplies.
A further weakening of the dollar also helped send oil prices higher by enticing overseas buyers armed with stronger currencies and others looking for a hedge against the greenback. But it also represented a stampede by bullish traders and optimistic computer models betting that prices still have further to rise.
The dollar was higher against the yen Monday, changing hands at 105.30 yen, compared to 104.90 yen late Friday in New York. The euro was little changed at US$1.5782.
The rally "was really driven by investors' capital coming into oil the last two days," said Shum. "You throw in this threat from Israel about attacking Iran on top of the dollar weakening," and oil prices are bound to rise.
"It was a wild rally on Friday," he said. "I've never seen that before."
The influx of so much fresh money into the energy markets has caught the attention of federal watchdogs. The U.S. Commodity Futures Trading Commission recently said it was six months into a probe of U.S. oil markets focused on possible price manipulation. The commission had no comment on Friday's surge other than to say officials are monitoring the markets closely.
In other Nymex trading, heating oil futures were down 1.7 cents to US$3.9570 a gallon, while gasoline prices slipped 2.7 cents to US$3.5210 a gallon. Natural gas futures rose 6.3 cents to US$12.756 per 1,000 cubic feet.
AP Business Writers Adam Schreck in New York and Matthew Perrone in Washington contributed to this report.