NEW YORK (MarketWatch) -- Oil futures dropped 6% early Tuesday, paring some of the strong gains posted in the previous session, as concerns over a sharp slowdown in energy demand weighed on sentiment.
Crude oil for January delivery fell $3.20, or 6%, to $51.28 a barrel in electronic trading on Globex.
"Oil prices were lower this morning amid profit-taking as the euphoria from the U.S. government's bailout of Citigroup wore off and demand concerns once again returned to the forefront," said Nimit Khamar, an analyst at Sucden Research, in a note.
On Monday, oil futures surged $4.57, or 9.2%, to end at $54.50 a barrel on the New York Mercantile Exchange after the U.S. government agreed to rescue Citigroup, once the nation's largest bank, in a $326 billion plan to avoid financial collapse. Stocks rallied after the news, while the dollar fell sharply against its major rivals.
"There is a lot of economic data out from the U.S. over the next two days ahead of the Thanksgiving holidays and is likely to further highlight the gloomy economic conditions faced by the U.S.," Khamar said.
Tuesday will feature a number of releases, including the Conference Board's consumer confidence gauge for November, another estimate of the third-quarter GDP in the U.S. as well the S&P/Case-Shiller home price index for September.
Other energy futures also fell sharply Tuesday, with January reformulated gasoline dropping 6 cents, or 5%, to $1.11 a gallon. January heating oil fell 7 cents, or 4%, to $1.73 a gallon and December natural gas futures dropped 23 cents, or 3.3%, to $6.66 per million British thermal units.
Oil traders are awaiting the upcoming meetings of the Organization of Petroleum Exporting Countries. The oil cartel is scheduled to meet Saturday in Egypt and again on Dec. 17 in Algeria.
"The only real support for oil at the moment is a potential supply cut by OPEC, when they meet for their informal meeting this weekend," Khamar said.
In other news, U.S. average gasoline prices fell below $1.90 a barrel on Tuesday, according to the AAA Daily Fuel Gauge Report. The current average price stands at $1.89 a gallon, down from $1.91 on Monday. A month ago, gasoline sold for $2.70 a gallon. A year ago, it sold for $3.09 a gallon.
