Updated from 2:27 p.m. EDT

Crude oil prices closed decidedly lower Monday, after briefly touching $49 a barrel Friday, amid a spate of record contract highs.

The benchmark U.S. crude lost 67 cents, or 1.4%, to $46.05 in regular floor trading on the New York Mercantile Exchange.

The focus of trading Monday shifted to the October future contract; the September one expired on Friday, having broken through the $49 level only to close 84 cents lower at $47.86. The October contract also closed lower Friday.

Traders kept an eye on fighting in Iraq, where the provisional government and U.S. forces battled militia in Najaf, Exports, however, returned to near full capacity, after a recent spate of sabotage attacks.

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.

The recent showdown between Iraq's interim government and radical Shiite cleric Muqtada al-Sadr in Najaf has been a major focus of the market.

Edgy traders have had no shortage of reasons to bid up oil recently, though many market watchers say prices are due for a sizable and much-needed correction as they push $50. Traders have built a $5 to $10 "terror premium" into prices.

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.

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.