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 Crude futures pulled back Monday from last week's record highs, falling $4.19 to $134.35 a barrel on the New York Mercantile Exchange, after the dollar strengthened and Saudi Arabia voiced willingness to meet any increase in demand.
Late Tuesday afternoon in Singapore, light, sweet crude for July delivery was up 27 cents at $134.62 a barrel. Earlier, it rose above $135.
"The market is taking a breather after the very sharp gain last week but it's undeniable we have a strong uptrend in the oil markets. The market is still prone to further price spike," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
The International Energy Agency on Tuesday lowered its forecast for global oil demand this year amid surging prices, but said that global hunger for oil is knocking markets out of kilter.
Shum said supplies could be hit if the current Atlantic hurricane season hurts production in the Gulf of Mexico. Markets remain rattled by an Israeli cabinet minister's warning of an attack on Iran if it didn't halt its nuclear program, which sent oil spiking Friday.
Israeli Prime Minister Ehud Olmert distanced himself from the comments over the weekend and other officials noted that the minister had not been expressing official government policy.
Still, "given the sharp gains we have seen, a further spike to the $150 level is possible," Shum said.
The jump began Thursday after European Central Bank President Jean-Claude Trichet suggested the bank could increase interest rates in July to counter rising inflation. That sent the dollar falling against the euro. Some investors buy commodities such as oil as a hedge against a weakening dollar.
Crude futures surged 8 percent Friday, touching an all-time high of $139.12 a barrel in after-hours trading.
Prices retreated Monday after the dollar improved against the euro on comments by Treasury Secretary Henry Paulson that he would not rule out intervention to stabilize the U.S. currency. The euro fell to $1.5572 in Asian trading Tuesday from $1.5651 late Monday in New York.
Saudi Arabia also called for a meeting of oil-producing countries after saying the current price of oil was unjustified. A Saudi minister said the kingdom would work with OPEC to "guarantee the availability of oil supplies now and in the future."
Analyst and trader Stephen Schork, in his Schork Report, suggested those comments cooled the market and "encouraged bulls to lock in some of last week's dubious gains," but left the future direction of prices open adding: "Whether or not the selling continues remains to be seen."
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 Other factors supporting oil prices included an explosion last week at a natural gas production facility in Australia, which boosted demand for diesel by that country's mining sector, said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
In Nigeria, a major U.S. oil supplier, a strike later this week could take 450,000 barrels in daily oil supplies off the market, Armstrong said. Both events highlight how tight oil supplies are.
The IEA, a Paris-based intergovernmental energy watchdog, predicted Tuesday that global oil product demand in 2008 would grow by 0.9 percent, or 800,000 barrels a day, down from the 1.2 percent, or 1 million barrels, forecast earlier.
The change follows decisions by several developing countries to reduce fuel subsidies because of high oil prices. The agency has also made upward revisions to its 2006 and 2007 data.
The agency lowered its 2008 global demand forecast to 86.8 million barrels a day, down 80,000 barrels from last month. The agency has been steadily lowering its demand predictions for the past several months as oil climbs repeatedly into record territory.
Friday's sharp $10.75 jump in oil prices had some of the hallmarks of a "blow-off top," Armstrong said, or a rapid, explosive run-up in prices that's followed by steep declines. Still, it's far to early to tell for sure.
"You never know you've been in a bubble until it's gone," Armstrong added.
In other Nymex trading, heating oil futures rose just over 2 cents to $3.8989 a gallon (3.8 liters.) Gasoline prices were up less than a penny to $3.4017 a gallon while natural gas futures held steady at $12.609 per 1,000 cubic feet.
July Brent crude fell 63 cents to $133.28 a barrel on London's ICE Futures Exchange.
[Associated Press; By GEORGE JAHN]
Associated Press writer Eileen Ng contributed to this report from Kuala Lumpur, Malaysia.
Copyright 2008 The Associated Press. All rights reserved. This
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