Oil prices fell below $85 a barrel on Friday as doubts over U.S. crude demand re-emerged and the dollar strengthened, making imports more expensive for emerging economies where consumption is surging.
The dollar .DXY gained 0.2 percent against a basket of currencies on Thursday, while European stock markets were sluggish following Asian equity losses.
U.S. crude for May delivery fell 94 cents to $84.57 a barrel by 1105 GMT, more than $2 lower than an 18-month high above $87 reached last week.
"The dollar is a bit stronger and equity markets are not too friendly today and that is having a negative impact (on oil prices)," said Eugen Weinberg, oil analyst at Commerzbank in Frankfurt.
"We've seen this for the last month that oil prices are more affected by macro factors impacting sentiment rather than fundamental factors," Weinberg added.
An unexpected jump in the weekly number of U.S. workers filing new jobless benefit claims raised doubts over the strength of economic recovery in the world's largest energy consumer, weighing on oil prices.
The May London Brent crude oil contract reached 18-month highs just before it expired on Thursday, jumping to a premium over the front-month U.S. crude contract of over $1.60.
The June contract, now the front-month contract, was trading about $1 higher than the equivalent contract for U.S. crude on Friday, shedding 76 cents to $86.83.
BRENT VS U.S. CRUDE
Strong economic data out of China painted a more positive outlook for demand across Asia, giving relative support to prices of Brent crude, the benchmark for most of the oil produced in Europe, Africa and Asia.
May Brent settled at $87.17 on Thursday, the highest close since front-month Brent ended at $90.25 on October 3, 2008. Brent's $87.58 intraday peak was the highest since $87.99 was struck on October 7, 2008.
Barclays Capital's technical team said in a note to clients that a corrective phase that had dominated the last week or so of oil trading was now over and the next targets were significantly higher.
"Following five days of modest lower closes, Brent crude is pressuring the top of a bullish flag-like pattern," Barclays Capital said. Brent is ready to test $88.15 per barrel, then
$90.00.