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Oil tumbled to near $136 on Tuesday as the dollar gained and concern eased over an Atlantic hurricane.
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U.S. light crude [US@CL.1 Loading... ()] fell more than $5 to settle at $136.04. London Brent crude [GB@IB.1 Loading... ()] was also trading lower.
Oil has fallen from a record high of $145.85 hit last week.
Hurricane Bertha became a "major" hurricane on Monday, but none of the computer models used to predict storm tracks indicated it would steer toward the Gulf, the focus of the U.S. oil and gas industry.
With the onset of the Atlantic hurricane season this year, oil traders will be watching for any signs of a storm that could disrupt Gulf oil production and refining operations.
"It seems the tone is easing for now and the hurricane is gone," a broker said. The broker added the gain in the dollar triggered technical sales due to a lack of fresh news related to oil supply and demand.
The dollar rebounded from earlier losses on Tuesday after Federal Reserve Chairman Ben Bernanke said the U.S. central bank may keep an emergency lending facility open beyond the end of the year for big Wall Street firms.
But analysts said the market focus would shift later this week to U.S. weekly oil statistics and a monthly report from the International Energy Agency (IEA), which will give a fresh look at the demand-supply situation amid a slowing world economy.
"We have U.S. weekly stats tomorrow and the IEA report comes up a day after," said Mike Wittner, the head of oil research with Societe Generale. "Also in a short term, negative impact may be refining margins. Margins are weaker now and that means oil refiners are not rushing to buy crude oil."
The weekly U.S. oil inventory data, which will include gasoline demand during the long weekend for the July 4 Independence Day holiday, will be released on Wednesday.
A Reuters preliminary poll shows analysts expect a 1.5 million barrel decline in crude stocks, a rise of 200,000 barrels in gasoline supplies and an increase of 1.8 million barrels in distillates.
Refining margins, or profit levels for oil refiners from producing products have weakened recently as prices of fuels such as gasoline and gas oil have not kept up with the sharp rise in crude oil prices.
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