NEW YORK Oil prices fell as much as $6 a barrel Tuesday, bringing crude down $10 this week and hurling prices back to levels not seen since June 26. Traders, keeping a wary eye on the global economy, cashed in gains from oil's recent rally.
A barrel of light, sweet crude for August delivery fell $6.23 in morning trading on the New York Mercantile Exchange, following a $3.92 slide on Monday, and later traded down $5.79 at $135.58. The market's bearish turn this week erases, at least for the time being, the effect of a rally that pushed prices past $145 in a string of record-setting sessions before the Fourth of July.
Analysts attributed much of the recent sell-off to profit-taking, saying traders were cashing in on the previous week's gains. At the same time, concerns about supply disruptions subsided and fears that the economic slowdown is spreading moved to the forefront.
"Sagging global equities, which are tipping a lack of confidence in economic growth in both developed and emerging economies, helped trigger the retreat in the energy markets," Addison Armstrong, director of market research at Tradition Energy, said in a research note.
Still, analysts warned the pullback could be fleeting, saying it is a correction that could quickly shift and send prices bolting higher.
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 wrote in a daily market commentary, suggesting the price respite might be temporary.
A decline in oil prices wouldn't translate to a pullback at the gas pump for some time. Retail gasoline prices in the U.S. held steady at a record $4.108 a gallon, according to AAA auto club, the Oil Price Information Service and Wright Express. Diesel continued to advance, rising more than half a penny to a record $4.807 a gallon.
Oil hit a trading record of $145.85 on last week before settling at a record close of $145.29 a barrel. On Monday, prices tumbled $3.92, or about 2.7 percent, to settle at $141.37.
Concern over the unruly oil market was a top priority Tuesday at a summit of industrialized powers in Rusutsu, Japan with leaders calling on petroleum suppliers to boost production and refining and to increase investment in oil exploration and output over the medium term.
The G-8 which groups the U.S., Britain, Japan, France, Germany, Canada, Russia and Italy also called for diversifying sources of energy and further efforts to improve energy efficiency.
"We remain positive about the long-term resilience of our economies and future global growth," the communique said, noting that growth in emerging economies remained strong. "However, the world economy is now facing uncertainty and downside risks persist."
The U.S. dollar was stronger against the euro and the pound, but lost ground against the Japanese yen and the Swiss franc. A falling dollar has helped boost oil prices about 50 percent 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.
In other Nymex trade, heating oil fell by 14.72 cents to $3.8224 a gallon and gasoline futures sank by about 12 cents to $3.3628 a gallon. Natural gas futures dipped more than 52 cents to fetch $12.453 per 1,000 cubic feet.August Brent crude also lost heavily, dropping by $5.31 to $136.57 barrel on the ICE Futures exchange in London.
Associated Press writers George Jahn in Vienna, Austria, and Malcolm Foster in Rusutsu, Japan, contributed to this report.