Oil futures fell sharply Monday, extending their retreat from $100 as investors sold on concerns that a cooling economy will curb demand for oil and gasolene.

Comments by Treasury Secretary Henry Paulson Monday suggesting there is no simple fix for the nation's housing crisis added to worries about the economy raised by last Friday's Labour Department jobs report; the government's data showed that employers added far fewer jobs last month than expected.

Economy concerns

Traders seemed to shrug off news of a confrontation Sunday between U.S. and Iranian warships in the Strait of Hormuz.

"The market overall is still a bit spooked by the larger economy question," said Kevin Saville, managing editor for the Americas energy desk at Platts, the energy research arm of the McGraw-Hill Cos.

A stronger dollar Monday also weighed on oil prices. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

Many analysts believe the weakening dollar helped draw speculative investors into oil markets this fall and winter, driving oil prices above US$100 a barrel last week.

On Monday, light, sweet crude for February delivery dropped US$2.82 to settle at US$95.09 a barrel on the New York Mercantile Exchange. It was the third day in a row oil prices have declined.

Earlier Monday, oil prices rose after U.S. military officials said Iranian Revolutionary Guard boats harassed and provoked three U.S. Navy ships in the strategic Strait of Hormuz.

Concerns that the West's standoff with Iran could grow into a wider confrontation helped boost oil prices last year.

In London, Brent crude futures fell $2.40 to settle at US$94.39 a barrel on the ICE Futures exchange.

- AP