NEW YORK - A stronger U.S. dollar and signs that tensions were easing in the Middle East sent benchmark crude prices tumbling more than US$4 Monday.
Light, sweet crude for August delivery fell $4.67 to US$140.60 a barrel on the New York Mercantile Exchange.
August Brent crude fell $2.57 to $141.85 a barrel on the ICE Futures exchange in London.
After the last few weeks' dizzying record-setting pace, however, analysts were skeptical that the drop represented the popping of any price bubble.
Iranian state media reported Friday that EU foreign policy chief Javier Solana and Iran's top nuclear negotiator have agreed to the latest in a series of talks during the second half of July over Iran's nuclear program and the enrichment of uranium.
"The Iranian situation turned confrontational last week which raised valid concerns in the oil market (over a possible attack). Now that seems less likely and this is a positive development,'' said John Vautrain, an analyst with Purvin & Gertz in Singapore.
Still, diplomats familiar with the negotiations there was little new on the table. And a European official told the AP that Solana had not committed himself to any meeting until Tehran's offer was thoroughly examined by the six nations seeking to engage the Islamic republic.
"As we look ahead to this week the bulls have their crosshairs set on $150,'' wrote analyst and trader Stephen Schork, in his Schork report. "At this point,that critical point of reference looks like a done deal, but time will tell.''
The contract hit a trading record of $145.85 on Thursday in New York before settling at a record close of $145.29 a barrel. There was no floor trade Friday in the U.S. because of the July Fourth holiday.
The bulls were also encouraged by comments from the head of the Organization of Petroleum Exporting Countries over the weekend, said Vautrain.
OPEC President Chakib Khelil said that surging oil prices aren't likely to fall amid strong demand, especially from China and India.
Khelil also told an energy conference in Algiers on Sunday that the steady increases of late were unrelated to supply and demand, blaming the weak U.S. dollar, oil's primary currency of exchange.
Khelil said he believes the reason the dollar has fallen against other currencies is the U.S. decision to lower interest rates in an effort to boost the American economy.
A falling dollar has helped boost oil prices around 50 per cent this year as investors often buy commodities such as oil as a hedge against inflation when the greenback weakens. Also, a struggling dollar makes oil less expensive to investors overseas.
Reversing the trend, at least temporarily, the euro fell against the dollar Monday as markets continued to mull less-than-hawkish comments from the European Central Bank on its future interest rate course, and industrial production numbers are expected in Britain and Germany.
In other Nymex trade, heating oil futures fell by close to 14 cents to $3.96 a gallon while gasoline prices dropped 10 cents to $3.4683 a gallon. Natural gas futures lost 43 cents to fetch $13.139 per 1,000 cubic feet.
