Oil fell sharply on Friday with U.S. light crude tumbling more than $2 toward $96 per barrel as the dollar rose and investors worried about the outlook for global growth and about the health of the euro zone.
The euro fell against the dollar as wariness about disagreements on how to tackle Greece's debt and ahead of a Spanish regional elections caused investors to cut back bullish euro bets before the weekend.
The dollar, which often moves inversely to commodities because oil and other raw materials are priced in the U.S. currency, rose around 0.6% against a basket of currencies.
U.S. light crude oil futures for June, which were due to expire later on Friday, were trading around $96.40 per barrel, down $2.04 by 1400 GMT, after hitting an intra-day high of $99.60.Brent crude for July dropped $2.12 to $109.30.
"The dollar is stronger against the euro -- largely on concerns about the Spanish elections with fears local municipalities will be forced to reveal how much debt they have," said Edward Meir, senior commodities analyst at brokers MF Global in Connecticut.
"Overall, the downtrend remains very much intact in oil."
The West's energy watchdog, the International Energy Agency (IEA), on Thursday urged OPEC to increase oil production to protect the global economy and appeared to suggest its members could release emergency stockpiles if OPEC failed to act.
But analysts say the Organization of the Petroleum Exporting Countries is extremely unlikely to raise output.
National Australia Bank commodities economist Ben Westmore said OPEC was unlikely to change its output targets at its meeting in Vienna on June 8.
"The relative abundance of crude stocks on the international market would be justification enough for (OPEC) to leave production quotas unchanged," he said. "All things considered, no change to OPEC production quotas appears to be the most likely outcome from the upcoming discussions."Governments from the United States to China are concerned the surge in oil prices this year may derail the nascent global economic recovery as high costs accelerate inflation, paring consumers' ability to spend, resulting in a demand slowdown.
The country's central bank governor, Zhou Xiaochuan, said on Friday the government was trying to find a balance between controlling inflation and supporting growth.
Oil prices have surged this year in part due to concerns that unrest will spread from Libya and Syria to other countries that are major oil exporters, just at a time when demand from emerging nations such as China and India continues to rise.
"The risk premium... is expected to persist through 2011 with an orderly near-term resolution of the conflict in Libya difficult to envisage," Westmore said.
Investors awaited data from the New York-based Economic Cycle Research Institute (ECRI), which was due to publish its weekly index, a measure of future U.S. growth, at 1430 GMT.