Oil Prices Drop Below $69 a Barrel

Natural gas flares from a pipe in the desert area of Sakhir, Bahrain, Monday, May 15, 2006. Bahraini Energy Minister Abdel Hussein Mirza said during an energy conference in Amman, Jordan, that Bahrain plans to seek international bids to dig several sea sites for oil and natural gas. (AP Photo/Hasan Jamali) (Hasan Jamali - AP)

SINGAPORE -- Crude futures dropped Tuesday amid concerns about weakening demand, and some analysts said the selloff was triggered by profit-taking.

Light, sweet crude for June delivery fell 60 cents to $68.81 a barrel in electronic trading on the New York Mercantile Exchange. The contract on Monday fell $2.63 to settle at $69.41 a barrel.

The Paris-based International Energy Agency said last week that high prices have curbed oil demand, and the U.S. Federal Reserve raised concerns about inflation, suggesting interest rates might be pushed higher in order to slow growth.

Saudi oil minister Ali Naimi said Monday that the market is well supplied, in part because high prices have trimmed consumption levels.

Some analysts, however, said the sell-off could be short-lived because of the approaching hurricane season. Last year's hurricanes Katrina and Rita devastated oil and natural gas production in the Gulf of Mexico, and forced the shutdown of refineries and pipelines that deliver fuel to the East Coast and Midwest markets.

In a sign of worsening relations with oil-producing Venezuela, the Bush administration said Monday it would ban arms sales to the oil-rich South American nation because of what it claims is a lack of support by President Hugo Chavez's leftist government for counterterrorism efforts.

Chavez, who has called Bush a "terrorist" and denounced the U.S.-led war in Iraq, brushed aside the matter, saying his government would not respond with punitive measures.

But concerns about Iran, a major oil exporter, left limited room for prices to fall.

The U.N. atomic agency has found traces of highly enriched uranium at an Iranian site linked to the country's defense ministry, diplomats said Friday. The finding added to concerns that Tehran was hiding activities related to making nuclear arms.

On Tuesday, gasoline futures dropped 1.40 cents to $2.04 a gallon, while heating oil lost 1.6 cents to $1.9290 a gallon. Natural gas prices gained 1.7 cents to $6.14 per 1,000 cubic feet.