NEW YORK -- Oil dropped below $90 a barrel for the first time this year Monday, and pump prices dropped 3 cents during the weekend as drivers catch a break after two months of steep increases.
Benchmark oil for April delivery fell 56 cents to finish at $90.12 a barrel in trading on the New York Mercantile Exchange. Earlier, the price fell as low as $89.33 a barrel.
The national average for a gallon of gas fell to $3.75 a gallon Monday from $3.78 Friday. At one point this winter the price rose for 36 straight days. The 49-cent increase for January and February set a record for that two-month period.
The price of oil declined as markets continued to digest the introduction in the U.S. of automatic government spending cuts, which could hurt the world's leading economy.
Spending cuts of roughly $85 billion automatically kicked in Friday after President Obama and Congress failed to meet a deadline for striking a deal to avert or soften the reductions. Negotiations Sunday ended in a bitter impasse, and what happens next is anyone's guess.
The International Monetary Fund has predicted that the spending cuts could reduce U.S. growth by some 0.5 percentage point in 2013.
Traders also said that a report showing weakness in China's service sector contributed to the drop in oil.
While a month ago oil was close to exceeding $100 a barrel, analysts said prices could continue to slide.