“This is largely profit-taking run amuck. There is no real hard news that you can tie this to. We have seen fundamentals weakening progressively month after month and the fall in the stock market calls our attention to that,” said Tim Evans of Citi Futures Perspective.
US crude at one point fell by an unprecedented $ 9.26 a barrel – the biggest percentage drop since December 2004 – it was $ 5.90 down at $ 139.28 a barrel. London Brent crude fell $ 5.10 to $ 138.82.
Brazilian oil giant Petrobras said its output was back at full capacity and would remain so until the end of the five-day strike that started at midnight on Sunday.
“The news that Brazil’s oil production is back at capacity despite a strike is negative for oil prices as crude earlier rallied on prospect of lower output from there,” said Phil Flynn, analyst at Alaron Trading.
Crude has risen from $ 20 a barrel in January 2002 to a peak of $ 147.27 last week on growing demand from nations like China and rising cash inflows into commodities from investors seeking to hedge against inflation and the weak dollar.
The dollar fell to a record low against the euro on Tuesday as concern about the health of the US financial sector weighing on sentiment. Investors said renewed weakness in the US currency could support oil.
Meanwhile, traders are keeping a watch on a low-pressure weather system about 1,931km east of the Lesser Antilles which may develop into a tropical depression.
Energy traders watch for storms that could enter the Gulf of Mexico and threaten US oil and gas production facilities.
The latest snapshot of supply in the United States, the world’s top oil consumer, due for release on Wednesday, will provide direction for prices later in the week.
