Oil fell more that $2 on Tuesday, pulled down by the stronger U.S. dollar and concerns moves to cut Asian fuel subsidies could hurt demand growth.
U.S. crude was down $2.54 at $129.65 a barrel by 6:41 p.m. British time after tumbling as low as $129.10 in the first day of trade on the New York Mercantile Exchange this week following the U.S. Memorial Day holiday.
London Brent crude gave up $3.10 to stand at $129.27.
The losses came as the U.S. dollar rose broadly after April U.S. new-home data showed an unexpected rise, dragging oil off record highs over $135 a barrel struck last week.
Oil price have doubled in the past year as speculators pile into commodities as a hedge against inflation and the weaker dollar, extending a six-year rally as supply struggles to keep pace with rising demand in emerging economies like China.
Prices rose Monday when Royal Dutch Shell said it was forced to cut production in Nigeria after rebels from the southern Niger Delta blew up an oil pipeline.
Further weakness on Tuesday came from signs some Asian countries could ease subsidies that have kept down prices, raising concern demand in the region could falter.
Demand in top consumer the United States is already under pressure from high prices.
"Crude is looking toppy due to very obvious demand destruction in the U.S. and impending demand fall off in Asia," said Nauman Barakat, senior vice president at Macquarie Futures USA.
Over the past week Indonesia, Taiwan, Sri Lanka and Bangladesh have either raised regulated fuel prices or pledged that they will, forced into unpopular action by the unsustainable cost of subsidies.
The weakness in demand has helped pull down near-term prices against crude futures five years out and beyond, where some analysts are concerned resource management in producer countries could keep supply under pressure.
PRICE PROTESTS
Surging fuel costs have caused a wave of protests across the globe, with convoys of trucks converging on London on Tuesday. French fishermen have blocked road and rail access to the fuel depot of France's largest oil refinery at Gonfreville, owned by Total.
Rising prices have prompted some oil consuming nations to call on OPEC to ramp up production. Members of the cartel insist speculators, not a shortfall in supply, is driving prices and say they will not meet ahead of their scheduled meeting in September to discuss output policy, Reuters reported.