Oil fell towards $120 yesterday, a day after its biggest jump in three months as part of a wider commodities rally spurred by a slump in the US dollar, and mounting tension between the United States and Russia.
US light crude for October delivery fell 98 cents to $120.20 a barrel by 1137 GMT, after surging nearly five per cent on Thursday.
London Brent crude fell $1.03 to $119.13.
Thursday's rally has left analysts divided, with some calling a temporary spurt, while others, notably those at long-time oil bull Goldman Sachs, saying fundamentals point to firm prices.
MF Global analyst Edward Meir said the $6 rise yesterday was probably a "dead cat bounce", an expression to describe a brief rally in a falling market. "At this stage of the game, we think the dead cat bounce theory has more credibility. Our negative view of the market is based on our belief that yesterday's move was way overdone," Meir said.
Prices were also weighed down by evidence of rising Opec supplies.
Industry consultant Petrologistics said yesterday Opec oil output was expected to rise in August by 450,000 barrels per day to 32.95 million bpd due to higher supply of crude oil from Iran and Angola.
However, oil has recovered around $9 from last Friday's four-month low, ending a dramatic slide of more than $35 from the record high of $147.27 a barrel hit on July 11 that was triggered by market worries about slowing global demand.
Gold drops in London
Gold fell in London as the dollar strengthened against the euro, reducing the appeal of the metal as an alternative investment.
Gold for immediate delivery fell $7.50, or 0.9 per cent, to $829.50 an ounce as of midday in London. Futures for December fell $4.30, or 0.5 per cent, to $834.70 in electronic trading on the Comex division of the New York Mercantile Exchange.
Platinum gained $1, or 0.1 per cent, to $1,460.50 an ounce, after falling as much as $23.50, or 1.6 per cent.