Oil prices dropped 3 per cent today as rising crude stockpiles in the US, the world's largest energy consumer, countered concerns over strong global demand.
Big money speculators, who are behind mammoth gains in the oil and commodities markets this year, unwound their long positions - leading some analysts to speculate the oil rally had finally peaked.
"This is it. This is the dam break," said Ed Silliere, analyst at Energy Merchant Intermarket Futures. "I'd have to say the bull market is done."
US light crude settled down $1.74 to $54.11 a barrel, more than $4 below Monday's record $58.28. London Brent crude fell $1.23 to $54.04 a barrel.
US crude prices have surged about 25 per cent this year, driven by concerns that rapidly rising energy demand in Asia's emerging economies, especially China and India, could outpace supply growth.
But the red-hot prices have attracted a tide of imports to the United States, building the nation's stockpiles to their highest in nearly three years.
"Crude inventories are not tight enough to justify current prices," said JP Morgan bank in a report.
Gasoline stockpiles in the United States, which tend to take the spotlight in the run up to the summer driving season, are also running at a solid year-on-year surplus despite recent weekly declines.
"The perception is that because refiners operated at nearly 94 percent of capacity last week, if gasoline imports rise, gasoline supply worries for the summer would be eased," said Phil Flynn, analyst at Alaron Trading.
Top world oil exporter Saudi Arabia has said it wants to help build world stockpiles up in time for an expected fourth-quarter surge in demand. The kingdom cut its official crude prices to European and US customers this week to make its lower-quality oil more attractive to buyers.