Oil futures surrended record high positions Tuesday on word that Mexican oil production is returning to normal and on expectations that a government report will show crude supplies grew last week.
A research report from influential trading house Goldman Sachs advising clients to sell oil futures to lock in profits contributed to the declines, analysts said.
Crude prices have surged in recent months on a mix of concerns about turmoil in the Middle East and news of falling crude supplies at home.
By Thursday, Mexico's state oil company Petroleos Mexicanos, or Pemex, is expected to resume production of 600,000 barrels of oil a day that was temporarily halted over the weekend due to stormy weather. The production disruption was a driving factor behind crude's jump on Monday to new settlement and trading records above $93 a barrel.
"It looks like the production will resume in a matter of days so it's only a temporary disruption," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Separately, the Energy Department is expected to report Wednesday that crude oil inventories rose slightly last week. Amid those expectations and the resumption of Mexican production, Goldman Sachs advised clients to cash in some profits.
"Goldman Sachs is an important name in the market and when their economists say that profit-taking may be in order, then that's bound to find an audience among some members of the trading community," said Addison Armstrong, an analyst at TFS Energy Futures LLC in Stamford, Connecticut.
Light, sweet crude for December delivery fell $3.15 to settle at $90.13 a barrel on the New York Mercantile Exchange. Crude prices are near inflation-adjusted highs hit in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $101 or more today.
The contract settled at a record $93.53 a barrel Monday, after rising as high as $93.80, a new trading record.
Other petroleum futures also fell Tuesday. November gasoline futures fell 7.03 cents to settle at $2.2571 a gallon, and November heating oil slid 4 cents to settle at $2.4246 a gallon.
Natural gas for December delivery rose 4.7 cents to settle at $8.021 per 1,000 cubic feet on the Nymex on forecasts for cooler weather in the Northeast and Midwest.
In London, December Brent crude fell $2.88 to settle at $87.44 a barrel on the ICE Futures exchange.
Analysts said a decision by the Nymex to lower the amount of money investors are allowed to borrow when they buy oil contracts contributed to Tuesday's price declines. This is known as buying on margin; the changes will force investors to pay more money up-front for contracts.
"You have to come up with more money any time you want to buy a contract," said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos.
Meanwhile, ministers from Organization of Petroleum Exporting Countries sent conflicting signals about the cartel's plans. An increase in production could send prices lower.
OPEC's president, Mohamed al-Hamli, said the group "will do what we can" to meet changes in supply and demand, adding: "We're concerned about the high level of prices."
But Libya's oil policy head said OPEC ministers weren't discussing any proposals to inject further crude into global oil markets, insisting such a move would do nothing to cool record prices.
Traders on Tuesday were also turning their attention to Wednesday's inventory report from the Energy Department's Energy Information Administration. Oil futures most recent price rally started last Wednesday, when the EIA reported a large, unexpected decline in crude inventories.
Analysts surveyed by Dow Jones Newswires, on average, predict that oil inventories rose by 100,000 barrels during the week ended Oct. 26, though estimates vary widely. Some analysts expect an increase of 2 million barrels, while other expect inventories to fall by 2.6 million barrels.
Refinery use is expected, on average, to grow by 0.5 percentage point to 87.6 percent of capacity, and gasoline inventories are expected to fall by 400,000 barrels. Distillates, which include heating oil and diesel fuel, are expected on average to fall by 1 million barrels.