NEW YORK (CNN/Money) - Oil prices dropped Tuesday, marking the second straight day of declines and raising some hopes that crude may have reached a top after the recent climb to record levels.
However, U.S. light crude for November delivery pared sharp losses from early Tuesday, closing 38 cents lower at $53.29 a barrel on the New York Mercantile Exchange (NYMEX).
The decline followed a Monday close of $53.67 on the NYMEX, which was down $1.26 from its previous close and off the $55.33 record hit in electronic trading early in the day.
In London Brent crude for December delivery fell 14 cents to close at $48.77 Tuesday after closing Monday down 90 cents to $49.03.
Oil analyst Peter Beutel, president of Cameron Hanover, said traders are looking for a sharper selloff of $2 to $3 a barrel to convince them that the top of the market has been reached. But he said it's possible that this week's retreat in prices is a sign of the end of the bull market.
"The jury is out if it is the top," he said. "If we close in positive territory by the end of the day, I'd say, 'Here we go again.' It's going to take a severe selloff to convince people this market is over.
"Still, the middle of October is the time for us to look at a top," Beutel added. "A number of fundamentals that used to move higher are getting pretty stale. The drop in production from the U.S. Gulf, the Nigerian strike, a lot of these factors aren't getting any worse."
Monday saw further signs that the high oil prices are starting to make a bigger hit on economic growth going forward, a fact that could hurt future oil demand.
Wall Street investment banks Morgan Stanley and J.P. Morgan cut their estimates for 2005 global growth Monday, blaming high fuel costs for a predicted slowdown in consumer demand.
Morgan Stanley reduced its forecast for global expansion next year to 3.6 percent, down from 3.9 percent, and warned of more possible revisions.
"As the prospects of a full-blown oil shock rise, the prospects of outright global recession in 2005 loom more and more likely," said Morgan Stanley chief economist Stephen Roach.
J.P. Morgan scaled back its forecast for U.S. growth to 3.25 percent for the first half of 2005, down from 4 percent.
On Monday OPEC cut its forecast for world oil demand growth next year by 130,000 barrels per day to 1.61 million bpd in anticipation of the impact of high prices on fuel consumption.
Demand growth this year, led by China, has raced along at a 25-year-high of 2.6 million barrels per day (bpd) on the 83 million bpd world market.
The head of Asia's biggest oil refiner, China's Sinopec Corp., predicted that domestic demand in the world's second-biggest oil consumer would moderate next year.
"We expect China's oil products demand growth to slow slightly from this year to 8 to 10 percent," Sinopec president Wang Jiming told reporters in Beijing.
Booming economic growth has fueled a near-15 percent rise in China's oil demand this year, but consumption is expected to ease as the government moves to prevent the economy from overheating.
But worries over a disruption to the world supply chain were revived on Tuesday when saboteurs attacked Iraq's northern export pipeline, setting a section on fire.
An Iraqi oil official said crude exports continued to flow through an undamaged part of the twin line.
"There are worries about demand going forward, but in the overall scheme of things, oil prices are still exceptionally high and are still vulnerable to supply hitches," said David Thurtell at Commonwealth Bank of Australia in Sydney.
-- Reuters contributed to this report.
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