Oil prices retreated Thursday after earlier touching a record high above $135 US a barrel.

Light sweet crude for July delivery fell $2.36 to settle at $130.81 a barrel on the New York Mercantile Exchange.

In overnight trading, oil reached a new peak of $135.09, but prices came back down as the U.S. dollar regained some of its lost ground. 

Many observers believe oil will continue the march that has seen the price surge from $65 per barrel roughly a year ago.

"The market is really structurally tight … oil demand is not growing that fast, but supply is constrained," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Also on Thursday, the Paris-based International Energy Agency said it is preparing to revise its global oil supply forecast.

Fatih Birol, the IEA's chief economist, said they are looking at supply depletion rates in roughly 400 oilfields in a first-ever study of its kind.

With files from the Associated Press