Also on Tuesday, the Organization of Petroleum Exporting Countries (OPEC) cut its global demand forecast for 2008 for the fourth time this year, adding consumption would continue to slow in 2009.

Crude futures hit a session low of 135.92 dollars on the New York Mercantile Exchange, the biggest drop since Jan. 17, 1991 after the United States started the first Gulf War.

"There are a lot plausible theories as to why the price of oil fell sharply today but in actually, it could be all of them or none of them," Turner pointed out.

"What this really demonstrates is that market participants are on pins and needles and any real major news can cause a significant price move in either direction. Today's action is tantamount to a false start at the men's 100 meter sprint finals in the Olympics. Everyone is on edge," said the analyst.

More volatility ahead

Crude prices have rocketed nearly 50 percent from beginning of this year as investors poured their money from stocks and bond markets as a hedge against inflation and the weak dollar. The prices also boosted by the growing need of energy consumption from emerging markets, like India and China.

Consumers in most countries already feeling the pinch of the high oil prices, which have triggered inflation and restrained personal spending.

"Despite today's price action, the trend has not been broken and we are still in a secular uptrend for oil . We will definitely hit new highs before the end of the year, but rest assured there will be a lot of volatility getting there," said Turner.

"It will not be a trade for the weak minded or those lacking visceral fortitude over the coming months," he added.

(Xinhua News Agency July 16, 2008)