The price of oil slipped closer to $95 a barrel Friday after dropping 3 percent during the previous session due to the impact of a strengthening dollar and fluctuating expectations about global supplies.
By early afternoon in Europe, the benchmark U.S. oil contract for February delivery was down 20 cents to $95.24 a barrel in electronic trading on the New York Mercantile Exchange.
On Thursday, the contract lost $2.98, the biggest one-day drop in crude since November of 2012. It has dropped sharply since closing above $100 a barrel last Friday for the first time since October.
While the recovery in the U.S. economy, the world's largest, has supported commodity prices with expectations of rising demand, the brighter prospects have also raised expectations that the Federal Reserve will continue to shrink its stimulus program, thereby boosting the value of the dollar.
A stronger dollar makes commodities such as oil that are priced in dollars more expensive for buyers using other currencies. That lowers demand, and prices. On Thursday, the euro was down to $1.3633 from $1.3663 late Wednesday in New York.
Thursday's steep drop in oil prices was also partly attributed to expectations of a production increase at a Libyan oil field that could return 300,000 barrels of daily production to the global market, though the situation in the north African country remains far from stable. Operations at many oil industry facilities — from wells to export terminals — have not yet returned to standard levels since the 2011 civil war.
"While recent announcements of a similar nature have failed to materialize and the situation in the east of the country remains in a deadlock, the potential of additional sweet crude supplies are serving to weigh further on the Brent market," said a report from analysts at JBC Energy in Vienna.
Brent crude, a benchmark used to price international crude used by many U.S. refineries, was down 3 cents to $107.75 a barrel on the ICE Futures exchange in London.
In other energy futures trading:
— Wholesale gasoline was down 0.13 cent to $2.6937 a gallon.
— Natural gas declined 4.1 cents to $4.28 per 1,000 cubic feet.
— Heating oil added 0.11 cent to $2.9878 a gallon.