LONDON--Crude oil futures fell further in Tuesday trading, a sign that Monday's $3 drop may not have been a technical glitch, but rather that market participants fear current high oil prices aren't sustainable.
At 1115 GMT, the front month November Brent contract on London's ICE futures exchange was down 9 cents, or 0.1%, at $113.70 a barrel. The front-month contract on the New York Mercantile Exchange was trading down 34 cents, or 0.4%, at $96.28 a barrel.
"If this is a flash crash, why didn't prices recover?" said Eugen Weinberg, head of commodities research at Commerzbank. He said markets may have needed a break after steadily rising over the past few months, but that there are still many supporting factors, such as possible production and output cuts in the Middle East and Libya.
Prices Monday dropped $3 within less than a minute, though no clear explanation emerged. Jack Pollard, a commodities analyst at Sucden Financial, said it was likely that the market was increasingly concerned that the U.S. would sell crude from its strategic reserves.
JBC Energy, in a note, said in the past crude markets have seen much bigger changes that couldn't be attributed to specific factors.
"I think we're still fairly vulnerable," Mr. Pollard said. "Considering weak demand and adequate supply, prices are overvalued now."
He said traders may be entering a period of profit taking.
Wednesday, traders will look to weekly results on crude oil inventories in the U.S., the world's biggest crude consumer, for cues on supply and demand dynamics in the market. Investors will Tuesday look to a survey on inventories from the American Petroleum Institute.
At 1118 GMT, the ICE's gasoil contract for November delivery was trading $18.25 lower, or 1.8%, at $989.00 per metric ton. Nymex gasoline for October delivery was up 134 points, or 0.5%, at $2.9567 per gallon.
-Write to Jenny Gross at jenny.gross@dowjones.com; Twitter: @jgginlondon
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