After hitting a two-year high of $114.83 per barrel in Monday trading, oil closed Friday at $97.18 in US markets.
The drop came as investors have also put downward pressure on prices for other commodities, from silver to industrial metals and grains. The broad complex of commodities took a sharp dive on Thursday, raising questions of whether a months-long boom in this sector of investing may be drawing to a close.
At the very least, it has lost some steam for several reasons. One is signs that the global economy may not be as strong as investors were assuming earlier this spring, suggesting that demand might be low. Another is that, once a hot investment trend looks like it might be peaking, money often flows out. Silver, in particular, posted such a sharp drop this week that some analysts said a speculative bubble had burst.
"The commodity bubble may be beginning to break as others join us in thinking about a hard landing in China, falling US house prices, and troubles in Japan and the eurozone," economist Gary Shilling, a forecaster based in Springfield, N.J., wrote in a report to clients earlier this month.
Other forces could support commodity prices, though. If the outlook for global economic growth turns positive again, so will the outlook for raw-material use. And investors have been turning to gold and natural-resource investments as a hedge against inflation.
Mr. Shilling, though taking a bearish outlook on commodities in general, says oil may be an exception because of uncertainty about politics in the key oil-producing region spanning the Middle East and North Africa.
Oil prices tend to rise on signs of strength in the economy, since that can boost demand. But if they rise too far too fast, as occurred in 2008 for example, price spikes in oil can help cause recessions or make them worse.
A stronger-than-expected report on the US job market – with 244,000 jobs created in April – initially caused oil to rise during US trading. But by the end of the day prices were down by more than $2 per barrel.
Some analysts say it's possible oil has seen its peak for the year, which would be welcome news for consumers. Gasoline prices have risen by about $1 per gallon during the past year.
One explanation for the recent pullback in commodity prices is a recent strengthening US dollar in foreign-exchange markets.
Commodities such as oil and silver are bought and sold in dollars. When the dollar is weak, those commodities look cheaper to holders of foreign currency so they buy. Conversely, when the dollar rises, commodities look more expensive. So they sell.
If the recent trend reverses and the dollar starts declining again, commodities including oil could experience a renewed updraft.
• Material from the Associated Press was used in this story.