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 The contract rose $1.67 to settle at a record $93.53 a barrel Monday, after climbing as high as $93.80, a trading record.
The surge was largely driven by news that Mexico's Petroleos Mexicanos, or Pemex, was to temporarily halt as much as 600,000 barrels of daily crude production, due to stormy weather.
But concern over the disruption of supply from Mexico was easing, analysts said.
"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.
Also lifting prices was the weakening U.S. dollar, which has drawn investors to dollar-denominated crude futures and increased the appeal of oil as an alternative investment, Shum said.
Oil prices could get another boost this week if the U.S. Federal Reserve cuts interest rates at its policy meeting Wednesday.
"What the U.S. Federal Reserve will do in terms of interest rates will be something that traders will watch," Shum said. "If indeed there is a rate cut, it may further weaken the U.S. dollar."
Shum said Tuesday's decline in crude prices was due mostly to profit taking after the previous session's record highs. But several factors continued to support oil prices, he said, such as the upcoming Northern Hemisphere winter season and concerns about inadequate supplies.
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 Prices have also been supported by fighting in Turkey between armed forces and Kurdish rebels, and the U.S. government's imposition last week of harsh penalties against Iran, the world's fourth largest oil producer.
Nymex heating oil futures lost 1.36 cents to $2.451 a gallon (3.8 liters) while gasoline prices dropped 1.29 cents to $2.3145 a gallon.
Natural gas futures added 0.4 cent to $7.97 per 1,000 cubic feet.
In London, Brent crude futures fell $1.15 to $89.17 a barrel on the ICE futures exchange.
Despite oil's relentless march higher in recent weeks, many analysts argue that the price increases are being driven by speculation, not market fundamentals. News headlines out of Turkey, Iran and, on Monday, Mexico, contributed to this buying frenzy, these analysts argue.
[The Associated Press;
By GILLIAN WONG]
Copyright 2007 The Associated Press. All rights reserved. This
material may not be published, broadcast, rewritten or
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