NEW YORK - Oil prices swung below US$140 a barrel Tuesday after a plunge of nearly $4 in the previous session, as the dollar strengthened and fears of a supply disruption faded.
But analysts warned the pullback was likely to be fleeting.
"The plunge is really a temporary bull correction and is viewed by the market as a buying opportunity,'' said Victor Shum, an analyst with Purvin & Gertz in Singapore. "We are also seeing the U.S. dollar easing a bit ... and that has helped support oil pricing.''
Trader and analyst Stephen Schork said the expectation just a few days ago that crude prices would touch $150 this week now "does not look like the proverbial done deal.''
Be that as it may, we have seen this movie before, i.e. crude oil weakens a little and the bubble-bears jump in,'' he added in his Schork report, suggesting the price respite might be temporary.
Sweet crude for August delivery fell $1.59 to $139.78 a barrel in electronic trade on the New York Mercantile Exchange by noon in Europe. The contract fell $3.92, or about 2.7 per cent, to settle at $141.37 in New York on Monday.
Oil hit a trading record of $145.85 on Thursday before settling at a record close of $145.29 a barrel. There was no floor trade in the U.S. on Friday due to the July Fourth holiday.
The U.S. dollar was stronger against most other major currencies in European trading Tuesday morning.
A falling dollar has helped boost oil prices around 50 per cent this year, with investors often buying commodities such as oil as a hedge against inflation when the greenback weakens.
Along with some signs of life from the dollar, fears that fresh conflict in the Middle East could cut oil supplies eased over the weekend after Iran gave an undisclosed response to an international offer of incentives if it suspends a central part of its nuclear program.
But Shum said the conflict isn't over.
President Mahmoud Ahmadinejad has insisted Iran would not bow to pressure to halt uranium enrichment, even though Tehran indicated willingness to open talks. World powers fear that Iran could use the uranium to build nuclear weapons.
"There are mixed signals and the Iran situation has certainly not been resolved,'' Shum said.
Ahmadinejad told Malaysian media during a visit to Kuala Lumpur on Monday that all nations should be able to use nuclear energy without any restrictions, stressing that it would provide them with a cheap alternative to crude oil.
Iranian state media reported that the European Union policy chief Javier Solana and Iran's top nuclear negotiator Saeed Jalili would hold talks in the second half of July.
In Asian currency trade, the dollar was weaker against the euro and yen compared with values seen Monday in New York. The euro was holding at $1.5736, while the dollar was buying about 106.40 yen.
In other Nymex trade, heating oil futures fell nearly three cents to $3.9420 a gallon (3.8 litres) while gasoline futures dropped by more than a penny to $3.4450 a gallon. Natural gas futures fell 15 cents to fetch $12.82 per 1,000 cubic feet.
August Brent crude slipped by $1.61 cents to $140.26 barrel on the ICE Futures exchange in London.
