Oil drops to near $83 on stronger U.S. dollar

Oil prices dropped to near $83 a barrel Friday as the dollar strengthened due to concerns about Europe's debt crisis and as stock markets fell across Asia and Europe.

By early afternoon in Europe, benchmark oil for January delivery was down 77 cents to $83.09 a barrel in electronic trading on the New York Mercantile Exchange. The contract last settled at $83.86 on Wednesday after gaining $2.61.

Markets in the U.S. were closed Thursday for the Thanksgiving holiday. They reopen Friday, but trading volume is often light because many traders take the day off.

"It seems that uncertain economic conditions continue to dominate the markets," said analysts at Sucden Financial Research. "Investors remain cautious and are prompted to some recent profit-taking following persistent worries about the eurozone's economic stability, the geopolitical tensions in the Korean peninsula and renewed concerns about China's tightening monetary policy."

A stronger dollar makes crude more expensive for investors holding other currencies and usually drives down oil futures.

On Friday, the euro was down to $1.3231 from $1.3290 on Thursday, while the British pound fell to $1.5683 from $1.5752 and the dollar rose to 83.85 Japanese yen from 83.63.

China's energy consumption has led growth in global oil demand this year, but investors are worried that recent measures aimed at containing inflation will undermine its economic expansion.

China's gross domestic product growth, which has averaged about 10 percent a year for the last five years, will likely slow next year to between 8 percent and 9 percent, Capital Economics said in a report.

"Even though we are not as pessimistic as some on the prospects for China, we still expect commodity prices to drop back further next year," Capital Economics said. "If inflation rises much further and remains high, a period of sub-8 percent GDP growth will become increasingly likely."

In other Nymex trading in December contracts, heating oil fell 2.21 cents to $2.3034 a gallon and gasoline lost 0.75 cent at $2.1543 a gallon. Natural gas rose 1.3 cents to $4.401 per 1,000 cubic feet.

In London, Brent crude dropped $1.08 to $85.02 a barrel on the ICE Futures exchange.