Crude oil traded near $127 a barrel in New York after a storm missed Mexico's biggest oilfield, and on speculation a U.S. probe into futures trading has reduced investor interest in buying the commodity.

Arthur, the first tropical storm of the Atlantic hurricane season, has weakened to a depression and missed Mexico's Cantarell oilfield by remaining on land. Hedge-fund managers and speculators reduced bets on higher oil prices by 80 percent since July as crude reached records and U.S. regulators started investigating trading, government data show.

"The storm went by without any major incident or disruption, so that's cleared the market of upside risks," said Tetsu Emori, fund manager at Astmax Ltd. in Tokyo. "The other bearish factor is the investigation by the U.S., which could reduce liquidity because there's concern among investors."

Crude oil for July delivery fell 43 cents, or 0.3 percent, to $126.92 a barrel at 1:37 p.m. Singapore time in electronic trading on the New York Mercantile Exchange. It gained 73 cents, or 0.6 percent, to settle at $127.35 a barrel on May 30.

Nymex crude futures reached a record $135.09 on May 22. Prices, which have surged 92 percent in the past year, fell 3.7 percent last week, the biggest weekly drop since March. Oil has gained 33 percent this year as a 6.6 percent drop in the dollar versus the euro made commodities including crude more attractive for buyers in other currencies.

By remaining over land, Arthur missed the Bay of Campeche and its Cantarell oilfield, where Petroleos Mexicanos, or Pemex, pumps 1.07 million barrels a day of oil. Earlier forecasts by the U.S. National Hurricane Center showed the storm could strengthen over the Bay of Campeche.

Pemex, the third-largest oil supplier to the U.S., shut export terminals at the ports of Dos Bocas and Cayo Arcas in the Gulf of Mexico as Arthur brought heavy winds and rains, according to a statement on the Web site of Mexico's Merchant Marine.

Arthur, the first tropical cyclone of the year in the Caribbean, had winds of 56 kilometers an hour (35 miles an hour) and was moving to the west-southwest at 9 kilometers an hour as of 5:30 p.m. local time, the Merchant Marine said in a separate statement. It was centered over land 128 kilometers southeast of Isla del Carmen.

The storm will lose its status as a tropical depression as higher terrain breaks up its rotation, with winds dropping to 46 kilometers an hour before dawn, the U.S. National Hurricane Center said in a statement at 5 p.m. Miami time.

Brent crude oil for July settlement was at $127.50 a barrel, down 28 cents, on London's ICE Futures Europe exchange at 1:39 p.m. Singapore time after earlier falling to $127.22 a barrel. The contract touched a record $135.14 on May 22.

Oil prices declined last week after an Energy Department report showed U.S. fuel consumption the previous week fell from a year earlier.

So-called speculative net-long positions fell to 25,867 contracts on the New York Mercantile Exchange in the week ended May 27 from a record 127,491 on July 31, according to a U.S. Commodity Futures Trading Commission report on May 30.

Scrutiny of the oil market increased as the U.S. Congress held hearings May 22 and oil soared to a record $135.09 a barrel the same day, threatening economic growth.

The CFTC, under pressure from Congress, said May 29 it was investigating the doubling of oil prices the past year and said it will consider giving more detail on the types of oil investors and their holdings.

Crude oil in New York on May 29 had its biggest decline since March 31, dropping $4.41, or 3.4 percent, to $126.62 a barrel. The drop in prices followed the Energy Department report that showed U.S. fuel demand declined 0.7 percent to 20.5 million barrels a day in the four weeks ended May 23 compared with a year earlier.

OPEC expects global demand for crude oil to drop this year because of slower economic growth and increasing reliance on other sources of energy, France 24 reported, citing the president of the group, Chakib Khelil.

Khelil, who is also the oil minister of Algeria, made the comments in an interview with Moroccan monthly Economie Entreprises, to be published today, the French TV station said on its Web site. The Organization of Petroleum Exporting Countries supplies more than 40 percent of the world's oil.

Khelil said May 31 prices may continue to rise because of a weak U.S. dollar and market speculation.

"OPEC would want higher prices if the U.S. dollar keeps falling," Peter McGuire, managing director at Commodity Warrants Australia, said in a Bloomberg Television interview in Hong Kong. "As the years roll on, they would want more bang for their buck."