Oil below $82 on stronger dollar, growth concerns

Oil prices slipped below $82 on Friday as the dollar strengthened and doubts remained about the resiliency of the economic recovery and Europe's struggle with its debt crisis.

By early afternoon in Europe, benchmark crude was down 45 cents to $81.69 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 93 cents to close at $82.14 per barrel in New York.

In London, Brent crude for November delivery was down 92 cents at $103.03 on the ICE Futures exchange.

German lawmakers took a major step toward dealing with Europe's debt crisis Thursday by strengthening a bailout fund for financially strapped countries. That helped eased the more immediate worries about Greece, which only has enough money to pay its bills through mid-October, but continued to weigh on markets.

The country risks a default on its debts, an event that could spiral into a financial and banking crisis across the continent. Some experts say a Greek default could lead to a global recession, hurting demand for oil.

"In the increasingly surreal oil markets, factors we never even considered in the past can now give us huge gains or losses," said U.S. energy consultancy Cameron Hanover. "We did not mind learning about quantitative easing, but Greek debt undoes us."

In the U.S., meanwhile, the Labor Department said the number of people seeking unemployment benefits fell sharply last week by 37,000 to a seasonally adjusted 391,000. That was the fewest since April 2.

Some energy traders viewed the data as a sign that the U.S. was grinding its way out of a slowdown. Others, however, found the data less than convincing.

"While we recognize this is an improvement, we hardly find it encouraging," analysts at the Schork Report wrote. "Initial jobless claims may be at their lowest level since April but, like congratulating the most stable inmate at the insane asylum, this is a heavily modified compliment."

A stronger dollar also dragged on prices by making crude more expensive for investors holding other currencies.

The euro slipped to $1.3496 from $1.3591 late Thursday in New York, while the dollar rose slightly to 76.83 yen from 76.79 yen.

In other Nymex contracts for November, heating oil fell 1.68 cents to $2.8098 per gallon and gasoline futures slid 0.91 cent to $2.5495 per gallon. Natural gas retreated 0.4 cent to $3.743 per 1,000 cubic feet.