Oil settled slightly above $116 a barrel on Thursday as the dollar firmed and investors booked profits after crude rallied to a record high earlier this week.
US light, sweet crude for June delivery fell $2.24 per barrel, or 1.9 percent, to settle at $116.06 on the New York Mercantile Exchange, dropping for the second straight session after reaching an all-time high near $120 this week.
London Brent crude also fell.
Oil and other dollar-denominated commodities came under pressure after a better-than-expected reading on US weekly jobless claims boosted the dollar versus the yen.
"The most important factor to watch on a short-term basis isthe dollar," said MF Global Energy in its daily research note.
Some technical experts believe that oil, which has risen some 20 percent this year, was in need of a correction after climbing to a record high of $119.90 on Tuesday.
But the energy complex found support from a planned workers strike this weekend at a major Scottish refinery that could force the closure of the key Forties North Sea pipeline.
"Crude oil remains overbought and will need some confirmation of disruptions to the Forties stream especially if the dollar maintains its strength," said Olivier Jakob of Petromatrix.
Talks to resolve the dispute at the 200,000 barrel-a-day Grangemouth refinery, which collapsed late on Wednesday, are unlikely to resume and the two-day strike over pensions is set to go ahead on Sunday, trade union officials said.
"The full shutdown of the refinery could significantly impact fuel supply availability, due to times involved in safely resuming operations after the strike as well as its potential impact on the operation of the Forties pipeline system," Barclays Capital said in its research note.
London's gas oil futures, European benchmark for distillate products such heating fuel and diesel, struck their all-time peak of $1,080.75 a ton.
"The ICE London gas oil contract is a key leading indicator. It is still showing strength, much later than normal," said Jan Stuart, economist with UBS.
Further support to distillates came from Finnish refiner Neste Oil. It said its diesel production line would be closed until the end of May.
Disruptions of some exports from Nigeria, Africa's largest exporter, were likely to provide limited support to crude oil prices.
Royal Dutch Shell on Thursday reaffirmed its outages stood unchanged at 169,000 barrels per day since the latest spate of attacks to its Nigerian oil facilities.
In Libya, some 45,000 bpd of Libyan offshore oil production had been halted due to a technical problem and could be off line for a few weeks, the head of Libya's National Oil Corporation (NOC) said on Thursday.