Crude oil prices plunged more than four dollars a barrel Friday as the dollar rose to a five-month high against the euro amid growing recession fears in the eurozone.
New York's main contract, light sweet crude for September, skidded a hefty 4.82 dollars to close at 115.20 dollars a barrel.
Over the week the futures contract has lost nearly 10 dollars a barrel.
In total the New York contract has shed more than 32 dollars a barrel since hitting a record-high 147.27 dollars on July 11.
In London, Brent North Sea crude for September delivery fell 4.53 dollars to settle at 113.33 dollars a barrel.
Oil prices on Thursday had climbed modestly, snapping a three-day losing streak, but resumed their downward spiral Friday as Italy became the first member of the 15-nation eurozone to announce its economy had contracted in the second quarter.
"Bad news in Europe is good news for the dollar and bearish for commodities," said Phil Flynn, analyst at Alaron Trading.
The euro slid below 1.50 dollars for the first time in more than five months.
A strong dollar makes goods priced in the US unit more expensive for holders of weaker currencies.
The dollar also has fresh support from the fading prospects of an interest rate increase by the European Central Bank, dealers said.
Oil futures have shed more than 20 percent in value since hitting record highs above 147 dollars per barrel on July 11.
In a move that sparked hope of an increase in global oil supplies, Iraq said it was resuming exploration activities after a break of nearly 20 years owing to crippling UN sanctions.
Iraq said it hoped to double its proven reserves of crude, adding that it wanted to ramp up output by 500,000 barrels per day from the current average production of 2.5 million bpd, about equal to the amount being pumped before the US-led invasion of March 2003.
Exports of 2.11 million bpd currently form the bulk of the war-torn nation's revenues, and the oil ministry is keen to raise capacity over the next five years to 4.5 million bpd.
World oil prices on Thursday had climbed toward 120 dollars a barrel on news that a pipeline carrying crude from Central Asia to the West would remain shut for about 15 days after a recent explosion.
On Friday, separatist Kurdish rebels claimed responsibility for Tuesday's blast on the Baku-Tbilisi-Ceyhan pipeline in eastern Turkey which is expected to leave the pipeline shut for two more weeks.
"The markets are more focused on the dollar and its newfound strength. Oil is less looking at geopolitical risk and slowing demand risk," said Alaron's Flynn.
"A few weeks ago when the market's mood was bullish, oil would have soared on that pipeline news but supply worries have less impact when the focus and the mood is based on slowing demand."
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