Oil futures prices lowered Monday amid concerns about economic growth and on profit-taking ahead of the November contract's expiration. However, doubts about a possible ceasefire between Turkey and Kurdish rebels in Iraq helped crude pare some of oil's losses.
The stock market's sharp downturn Friday has reignited concerns that the U.S. economy might be slowing, cutting demand for oil and petroleum products.
But traders also sold to lock in profits from a rally in which oil futures jumped almost 14 percent in less than two weeks. Light, sweet crude for November delivery reached a record $90.07 a barrel on Friday morning; it settled Monday at $87.56, down $1.04 from Friday's close on the New York Mercantile Exchange.
"You get to $90, and people say 'Here's a nice chance to take some profit,"' said Kevin Saville, managing editor for the Americas energy desk at Platts, the energy research arm of the McGraw-Hill Cos.
However, oil regained some ground before the close on concerns that an expected Kurdish cease-fire might not have much effect. Turkey has rejected such cease-fire declarations in the past, saying it would fight until all rebels surrender or are killed.
Turkish forces were seen moving toward the Iraq border on Monday after an attack by Kurdish rebels that left 12 soldiers dead and eight missing. Crude traders worry that a Turkish incursion into Iraq would cut oil supplies from northern Iraq.
December oil, meanwhile, fell 93 cents to settle at $86.02 a barrel on the Nymex.
Other energy futures followed crude lower. November gasoline fell 3.53 cents to settle at $2.1334 a gallon, and November heating oil fell 1.97 cents to settle at $2.3109 a gallon.
November natural gas fell 15 cents to settle at $6.891 per 1,000 cubic feet. Natural gas prices are under pressure from unseasonably warm temperatures in the north and Midwest and a forecast that this winter will be warmer than normal.
Analysts are beginning to debate whether last week's foray by crude above $90 marked the peak of the bull market. Analysts are similarly split over whether the underlying supply and demand fundamentals justify such high prices.
Predictions about the future of oil prices range from $60 to $120, depending on whether the analyst believes forecasts oil supplies will tighten amid growing demand in the fourth quarter. Many analysts think prices have risen sharply in recent weeks due to speculative investing. Indeed, data released on Friday shows speculative buying of oil contracts increased last week.
But other analysts argue that the fundamentals clearly support higher prices.
"The bashing of speculators in the oil market by uninformed and biased watchers of the energy prices and energy markets is the new sport for those that still are in denial about the real fundamentals facing the market," wrote Phil Flynn, an analyst at Alaron Trading Corp., in Chicago, in a research note.
The demand side of the oil fundamentals equation could be affected by an economic slowdown. Some investors worry Friday's sharp drop in the stock market reflects an overall cooling in the economy.