NEW YORK (AP) - Oil prices fell Monday, dropping closer to $100 a barrel as a stronger dollar diminished the appeal of energy and other commodities futures.

Retail gas prices, meanwhile, fell further from recent records, while diesel prices dipped slightly.

Many investors view commodities such as oil as a hedge against inflation and a falling dollar, so the greenback's advance Monday, which followed a stronger showing the past few trading days as well, made oil lose some of its recent allure. A stronger dollar also makes oil more expensive to overseas investors.

Many analysts believe the dollar's decline was the primary reason oil surged to a record near $112 a barrel early last week. But the effect tends to reverse when the dollar rises.

"Overall direction is still likely to be set by the course of the dollar," said Addison Armstrong, director of exchange traded markets at TFS Energy Futures LLC in Stamford, Conn., in a research note.

Light, sweet crude for May delivery fell 98 cents to settle at $100.86 a barrel on the New York Mercantile Exchange.

However, Monday's decline was far from decisive, and there were signs that some investors are willing to look beyond the dollar for future price direction. Prices alternated between gains and losses all day long as a tug of war took place between the speculators who sold as the dollar gained strength, and investors who bought on a view that the economy ? and demand for oil and gasoline ? may not be as weak as initially thought.

Earlier in the day, prices followed the stock market higher after JPMorgan Chase & Co. raised its offer for Bear Stearns Cos. to $10 a share from $2, and a report that existing home sales rose unexpectedly last month. Energy investors often view stocks as a proxy of the economy's health. Last week, oil prices dipped in part on concerns that Bear Stearns' near-collapse was a sign of significant economic problems.

Exaggerating Monday's price gyrations were lower than normal trading volumes due to a holiday in Europe, analysts said.

Still, Monday's trend of back-and-forth trading could continue. There are still investors willing to bet that the strong global economy will boost demand for oil and push prices higher. Some analysts believe oil's recent declines are temporary ? a correction in a bull market ? and that prices will forge higher again when the Federal Reserve cuts interest rates again, as is widely expected. Lower interest rates tend to further weaken the dollar.

But there is an opposing school of thought that argues prices have risen far higher than can be justified by the oil market's underlying supply and demand fundamentals. These analysts believe prices will fall soon and sharply ? regardless of what happens to the dollar.

Falling oil, gasoline and diesel prices would be a welcome relief for consumers who are also paying higher prices for food and feeling the pinch of falling home values.

At the pump, gas prices slipped 0.4 cent Monday to a national average of $3.26 a gallon, according to AAA and the Oil Price Information Service. And, for a change, diesel prices also slipped 0.7 cent from their most recent record to a national average of $4.029 a gallon.

Gasoline and diesel prices followed oil's surge to a series of records in recent weeks. But that march higher has halted, at least temporarily, as oil's rally has stalled. Diesel, used to transport the vast majority of the nation's goods, is a large part of the reason food prices are rising.

Other energy futures were mixed Monday. April heating oil futures fell 1.41 cents to settle at $2.9631 a gallon on the Nymex, while April gasoline futures rose 3.61 cents to settle at $2.6412 a gallon.

April natural gas futures rose 26.4 cents to settle at $9.329 per 1,000 cubic feet.

In London, May Brent crude fell 52 cents to settle at $99.86 barrel on the ICE Futures exchange.