Oil extends sharp decline to trade as low as $136

NEW YORK (MarketWatch) -- Crude-oil futures fell sharply for a second consecutive session Tuesday, trading as low as $136 a barrel, as comments from Federal Reserve Chairman Ben Bernanke lifted the dollar and put energy futures under heavy selling pressure.

Crude oil for August delivery fell $5.07, or 3.6%, to $136.30 a barrel on the New York Mercantile Exchange.

Earlier, the contract hit an intraday low of $136 a barrel, its lowest trading level since June 26.

Other energy futures also posted sharp losses, with natural gas declining 3.5%. Gold and other metals futures also fell.

"We're starting to see some of the fluff come out of the market a little bit," said Phil Flynn, vice president at futures brokerage Alaron Trading in Chicago.

"The market is facing up to the fact that we're almost halfway through the summer driving season and demand is shrinking," Flynn said. Also "the dollar is up and that's going to put some pressure on oil."

The dollar firmed against major currencies Tuesday, boosted by comments from Federal Reserve Chairman Ben Bernanke, who said the Fed may extend its lending facilities into next year.