NEW YORK - Oil prices tumbled more than $3 a barrel Tuesday as Tropical Storm Dolly grew increasingly unlikely to threaten supply, giving traders one less reason to buy as a strengthening dollar helped keep prices in check.

The sell-off was a throwback to last week's sharp declines, and dragged crude to its lowest level since early June. It was oil's fifth decline in the last six sessions.

Light, sweet crude for August delivery fell $3.09 to settle at $127.95 a barrel in its last trading day on the New York Mercantile Exchange. Earlier the contract, to be replaced by September crude Wednesday, dropped as low as $125.63.

The drop offered further evidence that investors who only a week and a half ago drove prices above $147 a barrel are pulling money out of the market.

"This is more of the long exit from the market by the hedge funds," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "A lot of these investors who have been supporting prices are hitting the road."

In Washington, the Senate voted 94-0 to move ahead with a plan that would require the Commodity Futures Trading Commission to set limits on trading in oil markets by certain large investors.

A number of Democratic lawmakers and other critics have blamed the historic rise in prices on speculators who they suggest are manipulating prices.

However, a federal task force said in an interim report that fundamental supply-and-demand factors are most likely to blame for the sharp run-up in oil prices. The Interagency Task Force on Commodity Markets said its preliminary analysis "does not support the proposition that speculative activity has systematically driven changes in oil prices."

Oil prices rose Monday partly on fears that Tropical Storm Dolly could threaten oil and gas installations in the Gulf of Mexico. That threat had largely subsided by Tuesday, however.

In its weekly pump spending survey, MasterCard found U.S. gasoline demand dropped last week for the 13th week in a row. Demand fell 3.3 percent compared with the same week a year earlier.

Retail gas prices fell, with the cost for a gallon dropping more than a penny overnight to $4.055, according to AAA, the Oil Price Information Service and Wright Express.