Oil's pullback - prices tumbled as much as $7 in a special trading session Sunday - also came as early signs suggested that Hurricane Ike delivered less damage than feared to the Gulf Coast energy oil and gas infrastructure.
Light, sweet crude for October delivery fell $5.47 to settle at $95.71 a barrel on the New York Mercantile Exchange - oil's first settlement under $100 since March 4.
The latest sell-off in oil began Sunday and accelerated Monday as traders digested a day of dramatic upheaval on Wall Street: Lehman Brothers Holdings Inc., a 158-year-old investment bank, filed for bankruptcy after failing to find a buyer and Merrill Lynch & Co. agreed to be bought out by Bank of America Corp.
Lehman, Merrill and other big institutional investors were major participants in the commodities boom of the past year, helping push the price of oil, precious metals and grains to historic highs until a slowing global economy helped bring a halt to the rally.
Analysts said investors feared that the upheaval in the financial sector could trigger another round of commodities liquidation - especially with Lehman likely to unwind its holdings. Other investors may also unload commodities, fearing that the deepening economic crisis will further reduce demand for energy and raw materials futures.
"I think this is giving the bulls further reason to exit the market," said Stephen Schork, an oil analyst and trader in Villanova, Pa., who said the pullback could reflect Lehman or a hedge fund selling.
Crude has fallen more than $50 - or 35 percent - from its all-time trading record of $147.27 reached July 11 as a global economic slowdown continues to weigh on demand for energy.
Other commodities traded mixed, with energy futures down but gold, silver and most grains trading higher.
Investors were also awaiting damage assessments to Gulf energy infrastructure after Ike's passage.
U.S. officials said Sunday that Ike destroyed at least 10 oil and gas platforms and damaged pipelines in the Gulf of Mexico. But that represents only a small portion of the 3,800 production platforms in the Gulf and pales in comparison to the catastrophic damage to energy infrastructure doled out by Hurricanes Katrina and Rita three years ago.
"Fears of widespread refinery damage have been allayed considerably and a number of facilities are coming back up in a timely fashion," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
Still, power outages along the Gulf Coast were slowing efforts to restart some refineries. Meanwhile, virtually all oil production in the Gulf and about 92 percent of natural gas output remained shut-in as of Sunday, according to the U.S. Minerals Management Service.
The shutdown of Gulf refineries sent wholesale gasoline prices spiking last week and pushed pump prices back above $4 a gallon in South Carolina, Alabama, Georgia and other states. Gasoline shortages were reported in Maryland, Virginia and North Carolina.
On Monday, a gallon of regular rose half a penny overnight to a new national average of $3.842 - up 16.7 cents from Friday, according to auto club AAA, the Oil Price Information Service and Wright Express.
Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J., said supply shortages caused by Ike and Hurricane Gustav three weeks ago should last at least another two weeks.
"That means we're looking at close to $4 a gallon for the rest of September," Kloza said. "People are going to observe more of this disconnect where retail prices move higher even though crude oil is trading below $100 a barrel."
Also adding to the selling pressure Monday was a slightly stronger dollar. A rising greenback encourages investors to unload commodities bought as a hedge against inflation or weakness in the U.S. currency.
Oil fell despite reports that militants have launched another attack Nigeria's oil infrastructure in a third day of violence.
Associated Press Writers Louise Watt in London and Alex Kennedy in Singapore contributed to this report.