In a reversal of the earlier rise in oil prices on fear of Hurricane Gustav, oil futures tumbled more than $7 a barrel today after the storm hit the US Gulf region with less force and apparently less damage than initially feared. Prices were also pulled lower by a strengthening dollar and a return to concerns that an economic slowdown has crippled demand for energy.

Light, sweet crude for October delivery fell $7.73 to $107.73 a barrel on the New York Mercantile Exchange (NYMEX), after earlier dropping as low as $105.46. The last time prices hovered in that range was in early April before a historic run-up above $147 per barrel. (See: Oil rises above record $112 a barrel as dollar dives and Oil reels under triple blow, rises to record $146.90 a barrel)

Earlier today, oil prices had plunged nearly $10 from Friday's settlement of $115.46 a barrel. The NYMEX was closed for Labor Day, but held a special electronic trading session on Sunday afternoon, when crude settled $1.24 higher to $116.70 a barrel.

On Friday, the contract settled at $115.46 a barrel as Gustav approached the US Gulf coast, a key region for oil drilling and refining. But traders were relieved that Gustav weakened as it neared the offshore oilrigs and Louisiana refineries, and appeared to have caused less damage than expected in New Orleans and surrounding areas.

As Hurricane Gustav dissipated, traders quickly turned their attention to slowing global economic growth, speculating that demand for crude will be dampened even in rapidly expanding China and India.

Adding further pressure was the US dollar, which climbed against most major currencies early Tuesday. Because crude is traded in the US currency around the world, a stronger dollar puts downward pressure on oil prices. When the dollar gains, it costs foreign investors more to purchase the same amount of energy.

Gustav was a Category 2 hurricane when it touched land on Monday and has since been downgraded to tropical depression status. Oil production, natural gas production and refineries were suspended as Gustav approached the Gulf Region. The shut down of oil production suspended 1.25 million barrels of crude per day.