Oil prices dropped below 70 dollars on Monday as traders took profits from recent gains, but analysts said they expected crude futures to quickly resume their recent rally.
In morning trading in London, Brent North Sea crude for delivery in July dipped as low as 69.75 dollars a barrel, before pulling back to 70.10, down 82 cents from Friday's closing level.
New York's main futures contract, light sweet crude for delivery in July, sank 95 cents to 71.09 dollars a barrel.
"Although further profit taking cannot be discarded as proven by lower movement in the early trading today, for the moment the overall uptrend is still intact," said ODL Securities analyst Marius Paun.
Crude oil had soared above 73 dollars a barrel last week, hitting a 2009 peak of 73.23 dollars in New York last Thursday -- the highest level since October -- amid hopes of a global economic recovery.
"Prices have rallied so much despite weak overall fundamentals (of supply and demand), so traders are taking profit," said Victor Shum, senior principal of energy consultants Purvin and Gertz in Singapore.
Shum added that the market was "ripe for a correction" after its bullish run, but prices were still heavily dependent on the value of the US dollar.
"The movement of the dollar will play an important role in driving oil," he said, noting that last week's rallies had primarily occurred against the backdrop of a weakening dollar.
A weaker dollar makes crude cheaper for buyers holding stronger currencies. That tends to stimulate demand and push the market higher.
Last week, oil had also jumped higher after the International Energy Agency raised projections for world oil demand by 120,000 barrels a day to 83.3 million in 2009, up from its 83.18 million forecast in May.
Additional support came from sliding crude oil inventories in the United States, which is the world's biggest energy consuming nation.
Meanwhile, rebels in Nigeria's restive Niger Delta claimed responsibility for more attacks against facilities run by US oil giant Chevron and warned FIFA against letting Nigeria host the under-17 World Cup tournament.
The Movement for the Emancipation of the Niger Delta (MEND) also threatened to extend its operations to other states in the oil-rich region.
The MEND statement said they had started a massive fire that destroyed the Abiteye flow station and blew up two other Chevron facilities there early Monday.
Chevron, which has recently acknowledged that there have been several incidents at its facilities in the area, was not available for comment.
Since 2006, MEND had been sabotaging the oil industry infrastructure and abducting oil workers, to the extent that it has seriously disrupted Nigeria's oil production.
Overall the unrest has caused oil production -- Nigeria's main export -- to fall by nearly a third, from 2.6 million barrels a day in 2006 to 1.8 million currently.