--Crude-oil futures lose ground on concerns about economic weakness, China-Japan tensions

--Tuesday's decline follows sudden price drop Monday

--Questions linger about Monday move, but light volume, options expiration seen as factors

(Adds oil price, comment from JBC Energy, in the second and seventh paragraphs.)

 
   By John M. Biers 
 

NEW YORK--Crude-oil futures fell again Tuesday morning in another sign that the bear case for the commodity could be gaining momentum in the market.

Nymex front-month crude-oil futures for October were trading 63 cents, or 0.7%, lower at $95.99 a barrel. Brent crude-oil futures were trading $1.11 lower at $112.68.

The losses came as market watchers continued to ponder the reason for a sudden plunge in oil prices Monday afternoon about 40 minutes before the close. Traders on Tuesday said Monday's move was likely exacerbated by light trading due to the Jewish New Year. In addition, expiration of oil options could have played a role, some traders said.

The fact that oil futures have stayed lower in the aftermath of Monday's move suggested to some traders that a slump in crude-oil prices may be gaining more credence with the market.

"It's confirmation that the selloff, while violent yesterday, was for real in terms of how oil's trading now," said John Kilduff, a trader at Again Capital.

Prior to Monday's trading, most market watchers had been girding for oil to pierce $100 a barrel, given the enactment of quantitative easing last week by the U.S. Federal Reserve and ongoing political strife in Syria and throughout the Middle East.

But Monday's trading, followed by the retreat again Tuesday morning, suggested that some traders saw an opportunity to take profits, said JBC Energy, a consulting firm. That oil prices also fell on European benchmark Brent futures "implies this was no technical glitch, but rather a profit-taking strategy by major market participants that were worried about a price correction," JBC said.

The market may now be giving more credence to an emerging bear case for oil, which rests on an increase in Chinese-Japanese tensions, doubts about Spain's well-being and anxiety about continued global economic weakness.

"It's the market telling us that perhaps the market is ahead of itself on the bullish case," said Phil Flynn, an analyst with the Price Futures Group, a commodities brokerage in Chicago.

Analysts and traders continued to scratch their heads Tuesday on the cause of Monday's move, which saw oil plummet $3 a barrel in less than a minute. But most saw light trading volume as a factor.

"You had a combination of a holiday, an expiration of options and negative market sentiment," said Ray Carbone, who works from the Nymex pits with Paramount Options. "It's a move which happened on the worst day possible, which is an illiquid day."

"There was less than a full cast of characters in trading yesterday because of the Jewish holiday, so volume was thin and it was easier than usual to move the market," said Joe Kinahan, the Chicago-based chief derivatives strategist at TD Ameritrade.

Mike Hiley, an energy broker at Newedge, said rumors of a U.S. strategic stockpile release and other chatter followed Monday's move but didn't precede it.

As prices tumbled, some traders in the options market may have needed to cover their positions by selling futures, creating a cascade of sales.

"I could see there being a domino effect," Mr. Hiley said.

Analyst Stephen Schork attributed the move in part to rising volatility in the oil market in the wake of the murder of the U.S. ambassador to Libya, uncertainty about the U.S. presidential election, the rise of anti-American sentiment in the Middle East and other factors.

Mr. Schork said the oil volatility index is up more than 50% from its April 27 low.

--Jerry Dicolo and Kaitlyn Kiernan contributed to this article.

Write to John Biers at john.biers@dowjones.com.