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WASHINGTON - Crude-oil prices surged above $51 a barrel for the first time yesterday as output in the Gulf of Mexico remains in shambles more than two weeks after Hurricane Ivan tore through the region.

Light crude for November delivery soared $1.18 to settle at $51.09 a barrel on the New York Mercantile Exchange -- the highest level in the exchange's history.

But even as the advance begins to appear unstoppable, with traders saying $55 a barrel seems possible, some analysts are convinced a speculative bubble has formed. They say prices have become inflated as institutional investors, such as hedge funds and mutual funds, pile on bets in the energy markets.

"Oil has become the only game in town," said Fadel Gheit, senior vice president of oil and gas research at Oppenheimer & Co. in New York. "Every other investment vehicle has disappointed over the last 12 months."

On Wall Street, uneasy investors sold stocks mostly lower as oil prices spurred worries that rising energy costs would curb consumer spending and corporate profits. But the major indexes did not see a major oil-based selloff, as they had in the past, when crude futures posted a new record closing price.

The Dow Jones Industrial Average fell 38.86, or 0.4 percent, to 10,177.68.

Broader stock indicators were narrowly mixed. The Standard & Poor's 500 index was down 0.69, or 0.1 percent, at 1,134.48, and the Nasdaq composite index gained 3.10, or 0.2 percent, to 1,955.50.

Rhode Island impact stocks fell, led by Textron Inc. and BJ's Wholesale Club Inc. The Bloomberg Rhode Island Index, a price- weighted list of companies with operations in the region, fell 0.65 to 248.49. Textron fell 79 cents to $64.74. BJ's fell 67 cents to $28.03.

Rising energy prices made investors anxious enough that they decided to collect profits after the market's substantial gains in four of the last five sessions.

But disappointment over stock market returns isn't the only factor driving institutional investors to energy futures.

Ed Silliere, vice president of risk management at Energy Merchant Corp. in New York, said fund managers are more worried that a major supply disruption in the Middle East, caused by terrorism or something else, would cause oil prices to skyrocket to a level that would wreak havoc in the global economy and devalue most of their investments.

Yesterday's price surge came as traders remained nervous about violence in oil-producing giants such as Nigeria and Iraq and concerned about the slow pace of recovery in Gulf of Mexico oil output.

BP PLC said yesterday that its daily output in the region is nearly 57 percent below normal and that it does not expect production to be fully restored until the end of the month.

"The market could keep going up in the near term until there is definite visibility that additional oil-tanker loadings in the Middle East actually start to appear," said George Gaspar, an oil analyst at R.W. Baird & Co. in Milwaukee.

But Gaspar doesn't believe worldwide oil output is inadequate to meet actual demand. "There's an enormous amount of speculation in the market today," he said.

But some market observers say current demand levels are being artificially exaggerated by the stockpiling of crude in countries such as China and India.

Gheit said he does not believe supply-demand fundamentals are the main reason why oil is trading above $50 a barrel.

"Energy has attracted a lot more nontraditional investors," Gheit said. "It's the same situation that happened five to six years ago when the Internet bubble formed and attracted everybody who knew nothing about technology."

"The only question is when this bubble bursts," he added.

Adding to investors' concerns was a disappointing report from the Institute for Supply Management, which said its service sector index fell to 56.7 last month from 58.2 in August. The reading was lower than the 59 expected by Wall Street. A figure over 50 represents expansion in the service sector, but the latest number represented a slowdown in growth.

Technology stocks fell as Advanced Micro Devices Inc., Intel Corp.'s rival in computer semiconductors, warned that its revenues would be less than forecast for the third quarter. AMD slid 2 cents to $13.68, while Intel gained 19 cents to $21.32.

A pair of technology bellwethers and Dow components were affected by a J.P. Morgan Securities research note, which upgraded IBM Corp. to "overweight" from "neutral," while downgrading Hewlett-Packard Co. to "neutral" from "overweight." IBM gained 16 cents to $87.32, while H-P fell 8 cents to $18.98.

Eastman Kodak Co. rose 31 cents to $33.80 after it announced it will cut nearly 900 jobs at three manufacturing facilities in Europe, part of the company's transition from film to digital photography.

Camden Property Trust slumped $1.85 to $45.05 after it said it would pay $1.9 billion in a takeover of rival Summit Properties Inc., which would create a major national network of apartment buildings. Summit was up $2.80 at $30.64 on the news.

Declining issues barely outnumbered advancers on the New York Stock Exchange, where volume came to 1.42 billion shares, compared with 1.53 billion on Monday.

The Russell 2000 index of smaller companies was down 1.75, or 0.3 percent, at 587.34.

Overseas, Japan's Nikkei stock average was flat. In Europe, Britain's FTSE 100 closed up 0.5 percent, France's CAC-40 edged 0.1 percent higher for the session, and Germany's DAX index gained 0.4 percent.