A seemingly unstoppable rise in the price of crude oil took a breather this week in the face of data that seems to suggest that people are starting to cut back on energy usage and a big rally in the dollar.

It only has been a week since crude oil futures topped $135 per barrel. Coming back to work after the long Memorial Day weekend, traders were confronted with a bevy of data and news stories that said people had foregone their usual holiday road trip due to the high cost of gasoline. That news, though expected, was borne out over the holiday. On the first day back this week, crude oil fell more than $4 per barrel at one point Tuesday before rallying back a little.

At the same time that oil fundamentals were showing some weakness, the dollar resumed its rally against several international currencies, most notably the euro. The euro fell in value against the dollar every day this week and ended with a large crescendo on Thursday, falling by more than 1 percent at one point on the day. There has been talk for some time that the dollar may have already seen its lows for the year as the Federal Reserve may be finished with interest rate cuts while the European Central Bank may start cutting rates later this year.

This case was made much stronger on Wednesday when two Federal Reserve governors made separate, but equally powerful statements regarding the future of interest rate moves in the U.S. They both indicated in their remarks that the Fed's interest rate cuts to date should be enough to revive the struggling U.S. economy. The inference of course is that if the Fed is not going to cut rates further, the next move, however far into the future, is an interest rate increase. These comments reinforced the dollar's strength and were primarily responsible for the large drop in the value of the euro during Thursday's trading session. The rally in the dollar further reinforced the sell-off in crude oil as the two have tended to move in opposite directions for some time now.

On Thursday morning, the Department of Energy released its weekly Petroleum Status Report, which showed a much higher than expected drop in crude oil inventories during the previous week. The unexpected drop in inventories rapidly reversed the early oil sell-off, eventually lifting crude by almost $4 in only a few minutes.

Shortly thereafter, the DOE reported that the drop in inventories was mostly due to a glitch with tanker unloading in the Gulf of Mexico and that the unloading would be back on track for the next report. The glitch means that millions of gallons of oil sitting just off the coast of the U.S. were not included in the current inventory count because they had not yet been off-loaded.

This revelation led to a huge sell-off. After an initial rise on the report's release, crude sold off by a full $7 by the end of the trading day, a loss of some 5.5 percent. On the week, through midday Thursday, crude fell by about $6.

If the dollar rally continues and data continue to confirm that Americans are making a concerted effort to conserve energy, crude oil could continue to see weakness in coming weeks.

However, if demand from overseas buyers continues to drive down the oil supply available to the rest of the world, the sell-off could be short-lived.

Walt Breitinger is vice president of commodities at Wachovia Securities. He can be reached at (219) 738-6460