New York, May 3 (IANS): Crude oil prices Monday edged down after choppy trade triggered by the news that terror mastermind Osama bin Laden was killed by US forces, Xinhua reported.

US President Barack Obama declared the death of Al Qaeda leader late Sunday. The dollar initially rose, and investors and traders became optimistic about the situation in the oil-rich Middle East. As a result, the oil prices fell sharply.

In the early trading session, the New York crude benchmark slipped over two percent from the 30-month peak.

"But that is very short-lived," said Raymond Carbone, a senior oil trader at the New York Mercantile Exchange.

Carbone said that bin Laden's death affected the markets mainly on the psychological level, "because the vulnerable market is sensitive to any news".

But after the knee-jerk reaction faded, traders realized all the main issues that affect the supply-demand relation in the oil markets remained unchanged, so the oil prices corrected the earlier move and started to bounce back.

And some analysts feared the death of bin Laden may fuel violent attacks by Al Qaeda, which caused concerns about the future oil supply.

Light, sweet crude for June delivery dropped 41 cents, or 0.36 percent, to settle at $113.52 a barrel on the New York Mercantile Exchange. In London, Brent crude for June delivery fell 77 cents, or 0.61 percent, to settle at $125.12 a barrel, once reaching $126.54 after an early slide to $121.67.