Crude futures prices fell Monday, briefly sinking below $49 a barrel, as the U.S. supply of oil grows and traders said institutional investors shifted their capital from commodities to equities.

After dropping as low as $48.60 per barrel, light sweet crude for December delivery settled 52 cents lower at $49.09 per barrel on the New York Mercantile Exchange (search). Nymex oil prices are now 11 percent below the settlement high of $55.17 a barrel set on Oct. 22 and Oct. 26.

Commercially available inventories of crude oil in the United States have risen for six straight weeks, according to the Energy Department (search), and analysts expect the agency to report another build in supply when it releases weekly data Wednesday.

Extra barrels of crude are coming into the market from abroad, thanks to high prices, and daily oil output in the Gulf of Mexico is recovering as the industry repairs damage to pipelines and platforms caused by Hurricane Ivan (search) in mid-September.

"The fundamentals are overwhelmingly in favor of lower prices," said Mike Fitzpatrick, a broker at Fimat USA Inc. in New York.

As oil prices fall from recent highs — and as the stock market begins to show some life — traders said hedge funds, mutual funds and others are taking money out of the energy futures game and plowing it into equities, causing crude futures to decline even further.

"There's some hot money that washes in and out of the market with the stroke of a computer key," Fitzpatrick said.

Another weight on oil prices lately is that heating oil supplies are expected to grow in coming weeks as refiners complete pre-winter maintenance in time to take advantage of high prices. That's important because the nation's supply of distillate fuel, which includes heating oil, diesel and jet fuel, is 12 percent thinner than it was a year ago.

December heating oil futures fell less than a penny to $1.3664 per gallon on Nymex, where natural gas futures dropped 34.4 cents to $7.60 per 1,000 cubic feet. Gasoline futures traded 1.15 cent lower at $1.2753 per gallon.

In London, Brent crude for December delivery fell 50 cents to $45.92 per barrel on the International Petroleum Exchange (search).

Despite the recent trend downward, traders and analysts remain skeptical of declaring the end of high oil prices this year.

"We could easily see $60 crude before Thanksgiving," said Dan Lippe, an analyst at the Houston-based consultancy Petral Worldwide.

If Wednesday's Energy Department report surprises the market, showing a decline in crude oil inventories, that could cause prices to rise and force speculators who were banking on lower prices to cover their bets, pushing prices even higher.

"At some point, these people would have to say 'Oops, I was wrong' and that could be the catalyst that takes us to $60," Lippe said.

The market is already jittery due to the world's limited excess production capacity, which puts the supply chain at risk in the event of a prolonged output disruption. Global consumption in 2004 has averaged more than 82 million barrels a day and the supply cushion is only about 1 percent of that.

For that reason, unrest in Iraq and Nigeria — and the output problems in the Gulf of Mexico — have kept traders on edge.

In Iraq on Monday thousands of U.S. troops attacked Sunni insurgents in Fallujah, an offensive aimed at putting an end to guerrilla control of the Sunni Muslim city. In Nigeria, the labor minister warned Monday that oil workers who participate in next week's planned general strike aimed at halting the country's exports risk losing their jobs.

Prices could rise if oil flows were significantly disrupted in either of those regions, Lippe said.

"Our fundamental view is that prices will remain between $40 to $50 for at least six to eight months until there is an adequate build in excess capacity," said Kurt Barrow, an analyst at Purvin & Gertz in Singapore.

Oil prices would have to surpass $90 per barrel to match the inflation-adjusted peak set in 1980.