Light, sweet crude for May delivery dropped 44 cents to $105.18 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe.

Earlier in the session, the Nymex contract had fallen as low as $104.34, while Brent bottomed out at $102.86 before recovering. On Friday, the contract fell $1.96 to settle at $105.62 a barrel.

In London, Brent crude futures dropped 1 cent to $103.76 a barrel on the ICE Futures exchange.

The euro gained slightly on the dollar Monday, with the European currency trading at $1.5781 - up from $1.5760 on Friday. The dollar also lost ground to the yen, falling to 99.36 Japanese yen from 100.00 yen on Friday.

As the dollar weakens, it makes oil and other commodities more appealing as a hedge against inflation. A weaker dollar also makes oil cheaper for overseas investors.

An official from Iraq's South Oil Co. said Saturday that "everything returned to normal as of 10 p.m. Thursday" after the bombing of a key oil export pipeline in Basra earlier in the day.

Word of Thursday's attack had raised concerns that Iraqi exports would fall sharply and sent oil prices surging higher. Basra has faced fierce clashes since fighting broke out Tuesday between government security forces and Shiite militia fighters.

"The oil price has been pulling back because the disruption in the oil pipeline supply in Iraq has been resolved," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Thursday's attack was the second pipeline bombing since the security crackdown was kicked off in Basra, which is about 550 kilometers (340 miles) southeast of Baghdad and accounts for most of Iraq's oil exports and output.

Concerns about the U.S. economy also weighed on futures. The U.S. Commerce Department said Friday consumer spending edged up by just 0.1 percent last month, the poorest showing since September 2006. Energy investors worry that a cooling economy will use less fuel.

"In the coming weeks, barring any new supply side concerns, the weaker fundamentals in the U.S. market will likely pull back prices," Shum said. "The latest oil product demand data out of the U.S. show a soft market."

Analysts are split on oil's direction. Many think prices will rise to new records in coming months as the dollar resumes its decline. The U.S. Federal Reserve is expected to cut interest rates several more times this year, and lower interest rates tend to weaken the dollar. Many analysts say the weaker dollar has been largely responsible for oil's run to a record near $112 a barrel earlier this month.

In other Nymex trading, heating oil futures were up 1.5 cents to $3.120 a gallon (3.8 liters) while gasoline prices fell 0.58 cent to $2.7112 a gallon. Natural gas futures rose 6.4 cents to $9.864 per 1,000 cubic feet.

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Associated Press writer Gillian Wong in Singapore contributed to this report.

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