Oil prices tumbled for the third straight day Thursday, taking the cost of crude below $130 a barrel for the first time in six weeks and signaling a possible end to a bull run that seemed intent on hitting $150 this summer.
Although no one would rule out an abrupt reversal like those that followed other dips in recent months, several oil analysts suggested that oil prices could continue to slide.
"The psychology is changing," said Michael Lynch, president of Strategic Energy & Economic Research, a Winchester, Mass.-based consulting firm. "What we're seeing right now is people starting to think that the weak economy is going to start overriding concerns about supply."
Consumption of gasoline and many other oil byproducts has subsided, putting inventories at unusually high levels for the middle of the U.S. driving season. That is now overriding worries about the worldwide tightness in oil supplies, new problems with Nigerian crude production and a host of geopolitical wild cards, Lynch and others said.
Some, however, warned that oil's slide was at least partly triggered by a wave of selling on the last day of trading for the August futures contract. They also noted that a hurricane or new bellicose talk between the U.S. and Iran could shove economic worries to the back burner and reignite oil's climb.
Light, sweet crude for August delivery fell $5.31, or 4%, to $129.29 a barrel on the New York Mercantile Exchange. Thursday's close put the price of crude 12% lower -- or nearly $18 less -- than last week's record high of $147.27 a barrel and the lowest since June 5.
The downward dash also hit other energy futures, such as natural gas, which fell more than 7% after a government report showed a larger-than-expected increase in U.S. inventories. Oil stocks, which have generated hefty returns during the crude price surge, also tumbled Thursday, with an index of 13 major energy stocks falling about 1%.
"You are seeing the end of the rally," said David Kirsch, a manager at PFC Energy in New York. "I think you're going to see a major correction. . . . If your pension fund was long in oil, you're going to have to work a couple more years."
The fall in oil prices helped propel the stock market to its second straight gain. The Dow rose 207.38 points, or 1.9%, to 11,446.66. The Standard & Poor's 500 index gained 14.96 points, or 1.2% to 1,260.32. The Nasdaq composite index rose 27.45 points, or 1.2%, to 2,312.30.
The rally was led once again by battered financial shares, which jumped on better-than-expected second-quarter earnings from JPMorgan Chase & Co. Its shares rose almost 14%. A closely followed bank-stock index jumped more than 9%.
JPMorgan's results came a day after Wells Fargo & Co. also reported better-than-expected results for the three months that ended June 30, raising hope that the credit crunch might not hurt Wall Street as much as feared.
However, the enthusiasm was tempered after the close of trading, when Merrill Lynch & Co. reported a larger-than-expected loss of almost $4.7 billion. It had to write off almost $10 billion because of the housing crisis and credit crunch, more than even Wall Street pessimists had expected.
After rising nearly 10% in the day, Merrill's stock fell as much as 7% in after-hours trading.
The stock market could continue to rise in the near term, but it will face stiff head winds from investors selling into rallies.
"I think we go higher, but it's going to be very hard going," said John Bollinger, head of Bollinger Capital Management in Manhattan Beach. "Every bit of that climb up, people are going to be saying, 'Oh, my God, I'm almost whole. Let me get out now.' "