The price of oil dropped more than a dollar on futures markets yesterday, reversing earlier gains, as the dollar strengthened.

US sweet light crude shed $1.38 to US$119.83 while London Brent crude dropped $1.35 to US$118.81.

Investment in commodities tends to rise when the dollar is weak because they are seen as a safe alternative. The reverse happens as the dollar rises.

Another factor pushing down prices is speculation that the Organisation of Petroleum Exporting Countries (Opec) could increase supplies.

Geopolitical tensions - such as the missile shield deal agreed earlier in the week between Poland and the US-had fuelled concerns about oil supply, buoying prices.

These concerns had abated and fears over the state of the US economy - which had sent the dollar down-had also eased.

Prices are far below the record of more than US$147 a barrel reached in July.

Many analysts expect that US demand will slow as the economy contracts, pushing prices lower.