Oil closed down Friday, giving back most of the previous session's big gain after the U.S. government's November jobs report wasn't as robust as some traders had hoped.
U.S.light, sweet crude for January delivery fell $1.95 to settle at $88.28 per barrel on the New York Mercantile Exchange (Nymex) after rising $2.74 on Thursday.
Retail gasoline prices, meanwhile, declined again, dropping 1.1 cents overnight to $3.023 per gallon, according to AAA and the Oil Price Information Service.
Gasoline prices have fallen nearly 9 cents, or 3 percent, since mid-November, and are expected to retreat below $3 a gallon as long as oil prices generally keep falling.
The Labor Department report "wasn't a blockbuster number that would keep feeding the oil bull," said Phil Flynn, an analyst at Alaron Trading, in Chicago.
The report showed employers added 94,000 jobs to their payrolls in November, more than expected.
The data quashed the hopes of some oil investors that the Federal Reserve will cut interest rates by a half percent instead of the more widely-expected quarter percent when it meets Tuesday, Flynn said.
Interest rate cuts tend to weaken the dollar against other currencies. Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.
Some analysts think volatility is becoming a central feature of a market whose sentiment seems to be changing from bullish to bearish.
Several analysts said it was difficult to find reasons to explain Thursday's price runup, or Friday's declines.
"In the last hour of (Thursday's) session, in the wake of nothing, (Nymex crude) spiked more than $1.25," said Stephen Schork, a trader and analyst in Villanova, Pa., in a research note.
Some analysts pegged the reason for Thursday's price surge on tough Bush administration talk on Iran.
Others cited the administration's announcement of a five-year freeze in loan rates for homeowners affected by the U.S. subprime mortgage crisis -- or an Organization for Economic Cooperation and Development estimate that China's economy is growing faster than initially expected.
Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Ill., is skeptical that any of these reasons adequately explains crude's recent volatility.
Other energy futures also fell Friday. January heating oil futures fell 4.03 cents to settle at $2.5047 per gallon on the Nymex.
January gasoline futures fell 3.23 cents to settle at $2.269 per gallon.
January natural gas futures fell 11.1 cents to $7.219 per 1,000 cubic feet.
In London, January Brent crude fell $1.68 to $88.50 per barrel on the ICE Futures exchange.
"We're just going to see these big daily swings, and at the end of the day people are just going to be scratching their heads," Ritterbusch said. "My biggest reason for (Friday's declines) would be that we ran up too far yesterday."