Oil dropped sharply from a record high on Monday as a part of wider commodity sell-off sparked by growing concern over the health of the world's largest economy, the United States.
U.S. crude was trading at $106.90 by 12:06 p.m EDT, down $3.31. Earlier on Monday, it hit a new record of $111.80.
Gold struck a record of $1,030.80 an ounce before falling to a $999.80.
Crude oil prices had risen by about 16 percent so far this year to the record high, driven in part by the weakness of the U.S. dollar, which makes raw materials priced in dollars relatively cheap, and as fund-managers seek a hedge against inflation.
However, analysts say the dollar-trading play could be running out of steam as the fallout of U.S. investment bank Bear Sterns have shifted investors' focus to economic weakness, which could suck in other economies and undermine demand for commodities.
"Forget about the talk about the dollar," said Harry Tchilinguirian with BNP Paribas. "The correction we see now will be very similar to the one we had in January-February, with the equity market dragging everything down."
Global stocks and the U.S. dollar fell sharply on Monday after JPMorgan Chase & Co agreed to buy rival investment bank Bear Stearns for a rock-bottom price.
At the same time, the U.S. Federal Reserve expanded lending to securities firms for the first time since the Great Depression in an attempt to shore up confidence.
Ministers of the Organization of the Petroleum Exporting Countries have repeatedly said high oil prices are not related to fundamentals, but are the result of speculation and the U.S. dollar's fall.
"There is no problem at all with world oil inventories," Kuwait's acting oil minister Mohammad al-Olaim said in comments published by state news agency KUNA on Monday.
Some oil executives have also said fundamentals of supply and demand do not explain oil price strength.
"From the physical point of view there is no high alarm," Royal Dutch Shell's Chief Executive Jeroen van der Veer said at a news conference. "It's difficult to understand why the oil price is where it is."
But he said prices were expected to stay volatile.
"We think that is quite likely because there is so much uncertainty around it, whilst the physical flow is basically the same as when the oil price was a lot lower."
U.S. crude was trading at $106.90 by 12:06 p.m EDT, down $3.31. Earlier on Monday, it hit a new record of $111.80.
Gold struck a record of $1,030.80 an ounce before falling to a $999.80.
Crude oil prices had risen by about 16 percent so far this year to the record high, driven in part by the weakness of the U.S. dollar, which makes raw materials priced in dollars relatively cheap, and as fund-managers seek a hedge against inflation.
However, analysts say the dollar-trading play could be running out of steam as the fallout of U.S. investment bank Bear Sterns have shifted investors' focus to economic weakness, which could suck in other economies and undermine demand for commodities.
"Forget about the talk about the dollar," said Harry Tchilinguirian with BNP Paribas. "The correction we see now will be very similar to the one we had in January-February, with the equity market dragging everything down."
Global stocks and the U.S. dollar fell sharply on Monday after JPMorgan Chase & Co agreed to buy rival investment bank Bear Stearns for a rock-bottom price.
At the same time, the U.S. Federal Reserve expanded lending to securities firms for the first time since the Great Depression in an attempt to shore up confidence.
Ministers of the Organization of the Petroleum Exporting Countries have repeatedly said high oil prices are not related to fundamentals, but are the result of speculation and the U.S. dollar's fall.
"There is no problem at all with world oil inventories," Kuwait's acting oil minister Mohammad al-Olaim said in comments published by state news agency KUNA on Monday.
Some oil executives have also said fundamentals of supply and demand do not explain oil price strength.
"From the physical point of view there is no high alarm," Royal Dutch Shell's Chief Executive Jeroen van der Veer said at a news conference. "It's difficult to understand why the oil price is where it is."
But he said prices were expected to stay volatile.
"We think that is quite likely because there is so much uncertainty around it, whilst the physical flow is basically the same as when the oil price was a lot lower."
