NEW YORK — Oil prices dropped sharply Thursday after China said it will raise fuel prices, a move that could dampen the booming Asian nation's oil consumption.

NEW YORK — Oil prices dropped sharply Thursday after China said it will raise fuel prices, a move that could dampen the booming Asian nation's oil consumption.

Prices also were given a downward push by the Iraqi Oil Ministry's announcement that it is close to signing oil service deals with several major Western oil companies to boost its crude output.

Retail gas prices, meanwhile, slid overnight.

Light, sweet crude for July delivery fell $4.75 to settle at $131.93 a barrel on the New York Mercantile Exchange.

China disclosed that it will raise prices for gasoline and diesel fuel 16 percent and 18 percent, respectively, beginning today.

Growing Chinese demand for oil has underpinned the multiyear rally in oil prices, but higher prices could crimp that demand.

Concerns about spiking Chinese demand for diesel due to cleanup operations in the aftermath of last month's earthquake contributed to oil's recent run-up.