Oil prices fell sharply on Monday, pulling back from its steep run-up last week that saw crude top $30 a barrel.
The June oil futures contract, which expired at the close of business on Monday, fell $1.28 a barrel to settle at $28.61 on the
New York Mercantile Exchange
. Oil for July delivery lost $1.12 a barrel to settle at $28.73.
"I'm sitting here watching the market drop like a rock," said Tim Evans, senior energy analyst at
Pegasus Econometric Group
. "This is probably a kick-off for what will be a more substantial downward correction."
Evans said that the sudden shift in sentiment, which did not reflect any real shift in the supply-demand balance, was further driven by reports out of Dubai that the
Organization of Petroleum Exporting Countries'
president, Ali Rodriguez of Venezuela, might push the group's member nations to raise production by 500,000 barrels a day if the 20-day average price for a basket of OPEC crude oil exceeds $28 a barrel.
"He was at least acknowledging that the market seemed to be asking for more oil supply," said Evans.
OPEC is scheduled to meet in Vienna on June 21 to determine its output policy.
Evans said that oil was likely to fall to $27 a barrel before trying to test the upside.
Unleaded gasoline futures fell in tow with crude, with the June futures contract slipping to 93.11 cents a gallon, down 2.22 cents. July gasoline fell to 90.93 cents a gallon, down 2.07 cents.
Evans said that gasoline could drop another 10 cents before leveling off.
"Gasoline falls partly as crude falls and partly as speculators liquidate long positions in a market that has a lot of potential for future tightness ... but isn't particularly tight right now," Evans said.