Oil fell nearly $3 a barrel today, reversing some of the previous session's hefty gains that were spurred by a fall in US fuel stocks.
US crude futures fell $2.90 to $133.48 a barrel earlier, while London Brent crude dropped $2.59 to $132.43.
Prices jumped by more than $5 a barrel yesterday after US government data showed a fall in crude inventories for the fourth week in a row.
"The market rose a lot last night, and I suspect that this drop is a short-term correction," said David Moore, a commodity analyst at the Commonwealth Bank of Australia in Sydney.
Oil prices have risen by roughly 40 per cent since the start of this year to an all-time high above $139 last week.
Investment banks, which have issued a series of extremely bullish price forecasts, have said there is a shortage of oil now and for the foreseeable future.
Producer countries have argued there is plenty of oil and that the price is artificially high. They say speculation needs to be tamed and leading oil exporter Saudi Arabia is hosting a meeting of producers and consumers on June 22nd to seek a solution.
If all goes according to plan, Saudi Arabia, Iraq and Iran should together pump at least 700,000 barrels per day more this month compared with May.
Regardless of supply and demand, analysts say investment class money, seeking an inflation hedge, has been lured into oil and other commodities by a weak US dollar that makes dollar-denominated raw materials relatively cheap.
The US dollar today hit a one-month high against a basket of major currencies while the euro fell sharply.