Oil fell below $80 a barrel on Tuesday, retreating for a third day as a strengthening dollar and concerns about the world economy prompted investors to take profits.
U.S. crude was down 86 cents, or 1.07 percent, at $79.38 a barrel by 1:45 p.m. EDT (1745 GMT) after dropping $1.42 on Monday. London Brent crude was off 70 cents to $76.94.
Watching a credit crunch in the United States and Europe that is showing signs of slowing economic growth, investors have pulled back and halted a rally that pushed oil to a record $83.90 on September 20.
Adding downward pressure on Tuesday, the dollar recovered from a lifetime low versus the euro that has made dollar-denominated commodities cheaper.
As a result, gold prices fell more than two percent.
Expectations the Gulf of Mexico oil and gas producing region may have weathered the worst of this year's hurricane season has also spurred profit-taking in oil, traders said.
The price outlook is pretty bearish at this point, said Dariusz Kowalczyk, chief investment strategist at CFC Seymour.
In the long-run, I expect prices to fall below $70 on the modest global economic outlook and the decline in the hurricane premium, he added.
Traders are awaiting U.S. weekly oil inventory data due out on Wednesday, which is expected to show a decline in crude stocks but a rise in distillate stocks.
A preliminary poll of analysts forecast crude stocks to show a 800,000 barrel fall, while distillate stocks were expected to have risen 1 million barrels. Gasoline supplies were expected to have risen 200,000 barrels.
The price of oil has been above $80 for much of the last three weeks, despite OPEC's agreement on September 11 to boost output by 500,000 barrels per day from November 1.
Qatar's oil minister brushed aside the need for the OPEC to raise output even further, saying speculative investment flowing into the market was responsible for $80-plus oil.
Venezuela's oil minister also said OPEC did not need to further raise output.
Barclays Capital technical analysts said oil's failure to build on Friday's push to $83.76 for U.S. crude pointed to further losses in the days ahead.
Analysts at Dresdner Kleinwort said the short-term news flow was now likely to be neutral to negative. However, we continue to see fundamentals remaining fairly tight with inventories being drawn down on a one year view. This will take a long time to ease even if OPEC sets its mind to it, the bank added.
Credit Suisse raised its forecast for U.S. crude to 2011 by $7.50 to $70 and its long-term price by $10 to $60.
The bank also noted: The oil market could easily spike on a demand surge or a serious supply outage, as spare capacity remains at low levels. Conversely, $80 oil is vulnerable to signs that global oil demand growth is inflecting downwards.
(Additional reporting by Richard Valdmanis in New York)