Updated from 2:08 a.m. EDT

Forty-nine dollars and counting.

Crude oil prices broke through another key level and touched yet another new high Friday, but wound up closing lower.

The benchmark U.S. crude lost 84 cents to $47.86, having traded above $49 earlier in the day. Prices rose 3% Thursday, when they pushed through the $48 level.

Prices fell as the showdown between Iraq's provisional government and radical Shiite cleric Muqtada al-Sadr in Najaf appeared to be on the verge of a nonviolent conclusion, based on various media reports, The cleric agreed to a cease-fire Wednesday, but there's been no follow-through on that agreement, which required his militia to disarm, leading to speculation of an inevitable assault on the city.

Violence in Iraq and its potential to disrupt production and exports -- as it has on several occasions since the U.S.-led war and subsequent occupation -- has become a constant factor for the markets.

Many market watchers say prices are due for a sizable and much-needed correction. Some say that could happen after today, when trading in the September futures contract expires and the focus of activity becomes the October contract, which ended 99 cents lower at $46.65. During the day, traders progressively gravitated to the October contract, which becomes the new benchmark.

Edgy traders have had no shortage of reasons to bid up oil recently.

Uncertainty surrounded the outcome of the high-stakes tax battle between the government and the nation's biggest oil company, Yukos -- a tug-of-war drama that has sparked frequent concerns for its potential to slow exports -- after a court rejected the company's latest appeal Tuesday.

On Wednesday a clutch of reports on supply and demand also spooked the markets. Weekly reports by the Department of Energy and the American Petroleum Institute both showed declines in stocks in the week ended Aug. 13, confirming market forecasts. In addition, a report by the Organization of Petroleum Exporting Countries forecast greater global demand in 2005 at a time when unusually strong global consumption -- especially from China -- has turned the supply-and-demand concept into a daily equation.

One recent potential supply worry was erased Sunday in Venezuela, where voters rejected a referendum seeking the recall of controversial President Hugo Chavez, easing concerns about possible civil unrest in Latin America's largest oil producer.

Traders also continue to pay close attention to Saudi Arabia, which warned again Monday that it is prepared to use remaining excess capacity to cool price speculation. The kingdom is the world's largest oil exporter.

Crude oil prices have routinely hit record highs in the past three weeks, following a modest decline from their previous June high as OPEC increased its official production level by some 2.5 million barrels a day.