Crude oil futures declined Monday, losing ground as traders feared last week's strong economic data that pushed oil above $85 a barrel may also push the Federal Reserve closer toward eventually raising interest rates.

Light, sweet crude for June delivery settled down 92 cents, or 1.1%, at $84.20 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange reached a 19-month high of $87.75 a barrel early in the day, but ended at $86.83 a barrel, down 42 cents.

"Some of the economic shine from last week is wearing off a little bit," said Phil Flynn, an oil market analyst at PFGBest in Chicago. "Because of the strong economic data, there is a growing concern that the Fed may have to think about raising rates, or maybe throw some cautionary language in their FOMC statement this week."

The Federal Reserve's Federal Open Market Committee meets Tuesday and Wednesday to discuss interest rate policy and will issue a statement Wednesday after its meeting.

Though the Fed's goal is to stimulate the economy, by keeping interest rates close to zero during the recession, it also supports investments in riskier assets such as oil and other commodities. Thus, for oil, an improvement in economic data is a double-edged sword: on one side it means an improving economy and higher oil demand, and on the other, it brings the Fed closer to the day when the economy has improved enough to raise rates, which would hit oil prices.

The U.S. oil benchmark rose more than $2 a barrel last week, with its largest gain on Friday after the U.S. reported the largest year-over-year surge in new home sales in nearly five years and the durable-goods report showed strong purchases by businesses of capital equipment. Both are seen as a sign of a faster-than-expected pace of economic recovery in the U.S. and stronger future oil demand.

Strong global equity markets helped push Brent, the European oil benchmark, to a new high overnight, and Brent continues to trade above U.S. light, sweet crude due to a glut of U.S. oil supply in a key bottleneck in Cushing, Okla. The glut was also reflected in an about $2-per-barrel discount of the June futures contract to the July contract, reflecting the market's forecast that high supplies will depress prices for at least the short term.

Part of oil's retreat on Monday had to do with oil reaching a key benchmark of $85 a barrel on Friday, which is a target price for oil set by many Wall Street firms and companies.

"We're kind of in a technical holding pattern," said Stephen Schork of The Schork Group in Villanova, Penn. "$85 acts as a magnet--the market doesn't seem to want to veer too far from that from either side."

Schork said trading firms bullish on the price of oil will try to break through to the next target--$90 per barrel--but could be held back by an oversupply in the market and the pace of economic recovery and consumer demand.

A potential downside for oil could be caused by the Securities and Exchange Commission's case against Goldman Sachs Group Inc. (GS), Schork said.

"It's no secret that the big Wall Street banks, Goldman, Morgan Stanley, J.P. Morgan and others are bullish on oil," he said. "If this government case really has legs, there could be a significant sell off if any of the big Wall Street firms are forced to monetize their profits [from oil and other commodities] to put aside funds for a litigation reserve."

Wednesday's report on crude inventories could also potentially move the crude markets. Crude stocks are expected to increase by 2.25 million barrels, according to the average estimate of analysts polled by Dow Jones Newswires. Gasoline stocks are expected to rise by 400,000 barrels, and distillate stocks including diesel fuel and heating oil are expected to rise by 1 million barrels. Refiners are expected to lower their utilization rate by 0.1 percentage point to 85.8% of capacity.

Front-month May reformulated gasoline blendstock, or RBOB, recently traded down 1.23 cents at $2.3408 a gallon. May heating oil recently traded 1.52 cents lower at $2.2353 a gallon.

More information on settlements and highs and lows for futures on Nymex and ICE platforms can be found by searching for the following headlines:

Nymex Light Crude Oil Close
Nymex Harbor RBOB Gasoline Close
Nymex Heating Oil Close
ICE Brent Crude Oil Close
ICE Gas Oil Close

-By Edward Welsch, Dow Jones Newswires; 613-237-0669;