Oil rose 35 percent from mid-February through the end of April. As it climbed above $100, economists warned that high fuel prices were taking a toll on the U.S. economy. Gasoline demand fell as motorists paid more at the pump, a trend reinforced by industry and government studies released this week. On Thursday, worries about the job market ahead of Friday's key employment report added to concerns about fuel demand.

A higher dollar also contributed to Thursday's sell-off. Benchmark West Texas Intermediate crude for June settled at $99.80 per barrel on the New York Mercantile Exchange. That's the lowest settlement since March 16. The last time oil had this big of a one—day percentage decline was April 20, 2009, when a barrel of oil cost less than half as much as it does now.

"More and more people were saying that oil was just too high," said Michael Lynch, president of Strategic Energy & Economic Research. "That got a lot of investors ready to run for the door. That's what they're doing now."

Analysts also said the lack of any terrorist retaliation of the killing of Osama bin Laden eased concerns about the safety of the world's oil fields.

Oil has joined other commodities like silver and cotton in retreat this week. This follows a months-long rally in commodities that was partly driven by lower U.S. interest rates and a weak dollar.

Other energy futures fell sharply as well. Heating oil fell 17.79 cents to $2.9651 per 1 gallon (3.79 liters) and gasoline futures lost 15.64 cents to $3.1661 per gallon. Natural gas gave up 26.2 cents at $4.382 per 1,000 cubic feet (28.32 cubic meters).

In London, Brent crude fell $7.18 to $114.01 per barrel on the ICE Futures exchange.

Earlier in the week, industry and government surveys showed that Americans are buying less gas as pump prices rise. On Thursday, the U.S. said that the number of people applying for unemployment benefits reached the highest level in eight months. That should depress gasoline demand, analysts say, because large numbers of Americans drive to work.

"Commuters are the bedrock of gasoline demand," Cameron Hanover analyst Peter Beutel said. When people lose jobs, "you're killing the best part of that demand the part that will always be there as long as someone has a job."

Falling oil prices haven't affected pump prices yet, however. A gallon of regular is more than a dollar higher than a year ago and is close to $4 per gallon. The national average reached $3.985 on Thursday, rising for a 44th consecutive day, according to AAA, Wright Express and Oil Price Information Service.

Economists and investors are increasingly concerned about the impact of higher fuel prices on the American economy.

"Gasoline has certainly put us at a tipping point," analyst and trader Stephen Schork said. "The economy is in a precarious situation."

The U.S. dollar rose strongly against euro after the European Central Bank's president declined to signal that interest rates would rise again next month. Oil, which is traded in dollars, tends to fall as the greenback rises and makes crude barrels more expensive for investors holding foreign money.