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 The decline came as it appears OPEC ministers, gathering for a meeting Wednesday, have all but ruled out pumping more oil to ease record-high prices.
Chakib Khelil, president of the Organization of Petroleum Exporting Countries, said the 13-nation cartel is shying away from boosting production because of the U.S. economic slowdown, political turmoil in the Middle East and expectations of slackening global demand for crude.
Light, sweet crude for April delivery on the New York Mercantile Exchange fell 45 cents to $102.00 a barrel in electronic trading by midday in Europe. The contract traded as high as $103.95 a barrel Monday before retreating to settle at $102.45, up 61 cents from the end of last week.
In London, Brent crude futures fell 36 cents to $100.12 a barrel by midday Tuesday on the ICE Futures exchange.
Oil futures -- propelled by the weak U.S. dollar -- climbed past $103.76 a barrel Monday on the New York Mercantile Exchange, breaking what many analysts consider to be the true record high for oil after the $38 per barrel price from 1980 is adjusted for inflation.
"Every other day, we've got a new record," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "It's due to the phenomenon of investors getting into commodities, the hard assets, to find a safer haven and a hedge against inflation."
Oil's most recent run into record territory has been driven by the dollar's slump against other world currencies.
"Energy prices are firm. With the dollar sinking to a record low ... WTI bulls took the bait and bid the NYMEX to a record," said The Schork Report, edited by Stephen Schork. "Thus, as goes the greenback so shall go WTI, in the opposite direction." WTI is the benchmark U.S. oil contract.
The dollar's decline to historic levels Monday was spurred by news that construction spending in the U.S. took its biggest nosedive in 14 years.
Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling. Gold, copper and wheat are among the other commodities that have rallied as the dollar has fallen.
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 Investors are also keeping an eye on Wednesday's OPEC meeting. Most expect the Organization of Petroleum Exporting Countries to hold output steady.
"It's going to be a nonevent," Shum said. "With pricing above $100, it's politically unacceptable to cut production even though fundamentals are weakening."
Analyst estimates for where oil goes from here vary widely. Some predict an eventual decline to the $65 or $70 range as supplies continue to grow and demand falls. Others see prices rising as high as $120 as investment capital continues to flow into oil.
Shum said investor demand for commodities was likely to remain strong in the near term amid expectations that further interest rate cuts by the U.S. central bank will keep the greenback from strengthening.
"Looking at the momentum, I think oil could go higher in the near term," he said.
Shum warned, though, that underlying fundamentals of oil supply and demand do not justify the price surge.
That "points to a risk that the price may fall sharply because it appears to be a price bubble that could potentially collapse," he said.
In other Nymex trading, heating oil futures fell 1.68 cents to $2.824 a gallon while gasoline prices dropped 0.85 cent to $2.663 a gallon. Natural gas futures rose 1.4 cent to $9.36 per 1,000 cubic feet.
[Associated Press; By PABLO GORONDI]
Associated Press writer Gillian Wong in Singapore contributed to this report.
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