Oil fell to $122 in early trading Wednesday, as traders locked in profits earned during oil's record up in the first half of the year.

Oil fell $2.21 to $122.10 per barrel -- its lowest level in about two months -- despite the fact the U.S. Energy Information Administration Wednesday reported a 4.8 million decline in weekly crude oil inventories.

Jim Dietz, independent energy trader, told BloggingStocks Wednesday that the bottom line is compelling traders and institutional investors to unwind intermediate oil-long positions.

"In some cases you've got players [traders, institutions] with four-month and six-month positions where they're up 30% or 35%. It's kind of hard to sit on that profit when it looks like oil demand growth is going to slow," Dietz said. "A good strategy would be to sell half or most of your position and that's helping to push the market lower now." Dietz added that he was presently short oil with a monthly contract.

Gasoline, heating oil also fall

The other major energy commodities also plunged early Wednesday. Heating oil plummeted 8 cents to $3.55 per gallon, unleaded gasoline plunged 10 cents to $3.25 per gallon, and natural gas fell 5 cents to $12.17 per million BTUs.

Dietz added that gasoline demand destruction in the U.S. and weakening oil demand overseas, combined with a firming dollar -- the dollar strengthened about a quarter cent versus the euro Wednesday morning to $1.5420 -- is taking "some of the steam out of crude oil futures, for now, at least." He said a correction "back to around $105-110 would not be unreasonable."

"The four-year history with oil has been don't move your hand too far from the buy button. So stay tuned," Dietz said.