Crude falls after hitting new record above $126

NEW YORK — Oil prices briefly spiked to a new record above $126 a barrel Monday but later ended lower as investors cashed in profits and an earthquake in China raised the possibility of a drop in demand.

Retail gas prices, meanwhile, rose to another record above $3.70 a gallon, again following crude's recent path higher.

Oil futures have set new records for six straight sessions, and analysts said the market was due for a correction following the seemingly relentless climb upward.

"It looks like we're seeing a little bit of a correction. We put in the highs last week so we're seeing some profit-taking," said Tom Bentz, analyst at BNP Paribas Commodity Futures in New York.

Light, sweet crude for June delivery jumped to a new all-time high of $126.40 a barrel it light trading on the New York Mercantile Exchange before falling back to settle at $124.23, down $1.73 from Friday's closing record of $125.96. It was the first time oil has closed lower in six sessions.

Monday's price fluctation underscored the uncertainty over oil's future direction. Many analysts believe the weak dollar has driven oil prices to levels that defy fundamental supply and demand economics. But other investors see continued strong demand for oil and fuel from China and India as a sign that oil prices have further room to rise.

Moreover, growing concerns about declining crude production in Mexico, Russia and elsewhere are keeping prices in record territory, analysts say. Goldman Sachs said in a report last week that crude prices could rise to $150 to $200 within two years.

"What's really circulating now is the possibility that world oil production has peaked. There's an idea that we can't change supply but we can change demand, and the only way to do that is to rally the market higher," said James Cordier, founder of OptionSellers.com, a Tampa, Fla., trading firm.

Also pressuring oil prices Monday were concerns that a massive earthquake Monday in western China may temporarily slow demand. The 7.8-magnitude quake, which was felt as far away as Vietnam, Pakistan and Thailand, killed more than 7,600 people, toppled buildings and knocked out power lines.

"We know that some power and electricity plants are off-line, so that could have a negative impact on demand," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago. "But obviously the market is still showing strength so it has a lot of bounce in it."