Oil slid for a second day in choppy trade on Friday, with Brent posting its biggest two-day drop since September as the dollar rallied and traders feared slower oil demand in China and diminished investor demand in the United States.
Brent crude fell for a second session after Federal Reserve Chairman Ben Bernanke on Wednesday laid out a strategy for paring back monetary stimulus. U.S. crude futures fell for a third straight day, breaking through 50- and 100-day moving averages, even as U.S. equity markets stabilized after two days of sharp losses. Brent took two-day losses to nearly 5 percent.
"Without quantitative easing and strong China demand, the oil bull story evaporates," said Phil Flynn, energy analyst at Price Futures Group in Chicago, Illinois.
Brent crude futures fell more than $2 to hover just above $100 a barrel, then pared losses to close down $1.24 at $100.91 a barrel. Front-month U.S. light, sweet crude fell more than $2 in early trade, then settled $1.45 lower at $93.69 a barrel. Second month WTI traded down $1.52 to $93.63.
Trading volumes on Brent and WTI were slightly above the 30-day average. The spread between Brent and U.S. crude narrowed to $7.22 after hitting a session low of $6.54, its narrowest since November 2011.
"We dropped nearly $6 in less than three days, so you're seeing some profit-taking from shorts covering," said Gene McGillian, analyst with Tradition Energy in Stamford, Conn. "The selloff was probably overextended," he said, noting that U.S. crude has been trading between $92 and $97 for the past two months.
Contracts further out on U.S. crude's trading curve fell more than near-term WTI contracts, steepening the premium for near-term months, a condition traders call backwardation. Emergence of new pipeline capacity to drain inventories from the Cushing, Okla., delivery point should ease a glut of U.S. crude in the Midwest.
