Oil prices dropped 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 weak U.S. dollar.
Crude futures made their biggest single-day jump ever Friday, soaring nearly US$11 for the day to US$138.54 a barrel, a rise of more than 8 percent that battered stocks on 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.
Late Monday afternoon in Singapore, light, sweet crude for July delivery was down US$2.21 to US$136.33 a barrel. The price decline accelerated as trading began in Europe.
"We're likely to see some pullback.... and a choppy period of ups and downs," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
"We're not going to see a substantial reduction in demand," he said. "Supply side concerns will continute to support pricing."
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 a barrel by early July.
In after-hours trading Friday, oil prices briefly touched US$139.12, an all-time high.
So far, there has been little sign of weakening global demand for crude oil, despite the economic slowdown in the U.S. and recent moves by India, Malaysia and other Asian countries to raise gasoline prices after they cut subsidies.
It will take some months to see if there 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 oil consumer, authorities have refrained from raising state-set retail prices in recent months, suggesting that demand there may not be affected.
Asian stock markets sank Monday, tracking Friday's declines on Wall Street, when the Dow Jones industrial average plunged more than 3 percent to 12,209.81 _ its biggest drop in more than 15 months. Japan's Nikkei 225 index sank 2.1 percent, while India's Sensex index was down 2.7 percent in afternoon trading after having tumbled as much as 4.4 percent.
Traders also were unnerved by remarks Friday 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 weakening of the dollar has also helped send oil prices higher by enticing overseas buyers armed with stronger currencies and others looking for a hedge against the greenback. The euro rose to US$1.5796 from US$1.5777 late Friday in New York, while the dollar rose to 105.69 yen, compared to 104.90 yen late Friday in New York.
Last week's surge "was really driven by investors' capital coming into oil the last two days," said Shum. "It was a wild rally on Friday. 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 1.5 cents to US$3.9588 a gallon, while gasoline prices slipped 3.13 cents to $3.5167 a gallon. Natural gas futures rose 12.735 cents to US$12.735 per 1,000 cubic feet.
In London, July Brent crude was up 54 cents to US$137.15 a barrel on the ICE Futures exchange.
AP Business Writers Adam Schreck in New York and Matthew Perrone in Washington contributed to this report.