Oil prices tumble on wild day

NEW YORK (AP) -- Oil prices tumbled Tuesday as U.S. stocks sold off amid worries about the nation's economic health.

A five-day strike in Brazil by oil workers seems to have less effect than feared.

Prices dropped more than $10 a barrel from their highest point of the day.

The turnaround may not signal a lasting shift in sentiment -- prices have swung violently in recent days as they flirted with record highs. But it does underscore investor uncertainty about the sustainability of sky-high prices and their effect on the broader economy.

Earlier, the contract rose as high as $146.73 and fell as low as $135.92. At the close, a barrel of light, sweet crude was $6.44 down at $138.74 on the New York Mercantile Exchange.

The ingredients for further gains were in place early on.

The dollar fell to a new low against the euro, prompting investors to pour money into oil as a hedge against inflation and made crude cheaper for overseas buyers.

Meanwhile, threats to supply from Iran, Nigeria and Brazil provided a solid floor on oil prices.

But they were not strong enough slow oil's rapid decline before noon.

Mounting worries about the health of the U.S. economy helped spur the sell-off.

Don't Miss Business 360: The $200 barrel CNN/Money: U.S. Fed chief's gloomy conclusion Federal Reserve Chairman Ben Bernanke told Congress that "numerous difficulties" are racking the economy of the world's largest oil consumer, and warned that rising prices for energy and food are heightening the risk of inflation accelerating.

At the same time, the Labor Department reported that wholesale inflation jumped by 1.8 percent last month, a larger-than-expected gain. Over the past year, wholesale prices have risen 9.2 percent, the most since 1981.

Bernanke's sobering comments and lingering concerns about the health of the financial sector helped drive stocks down sharply. In midmorning trading, the Dow Jones industrial average was down 180.51, or 1.63 percent, to 10,874.68. Broader indexes also sank.

A five-day strike by Brazilian oil workers that began early Monday also seemed to have less effect than feared. The action cut production of government-run Petroleo Brasileiro SA, or Petrobras, by only about 4 percent by Monday evening. Petrobras produces about 1.6 million barrels of oil a day.

"We are not making a big case of the strike in Brazil as it is well defined in time, hence carries little un-priced risk." Olivier Jakob, an analyst at Petromatrix in Switzerland, said in a research note.

Soaring oil prices are taking a toll on drivers the world over, stoking fears that sustained high fuel costs could crimp global demand.

General Motors Corp., the leading U.S. automaker, said it is assuming oil prices will hover between $130 to $150 a barrel next year.

The company made the prediction as it laid out plans to slash jobs and truck production, suspend its dividend and borrow up to $3 billion as it grapples with an ailing U.S. economy and record high fuel prices.

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