Brent crude futures settled at $79.87 per barrel, down $1.49, or 1.8%, while the U.S. West Texas Intermediate crude futures fell $1.47, or 1.9%, to settle at $75.42 a barrel, Reuters reported.

"It just appears to be some profit taking, with some demand concerns coming back to the front and center as the dollar rebounds," said John Kilduff, partner at Again Capital.

The U.S. dollar index edged higher after hitting a 15-month low during the session, as investors consolidated ahead of the weekend. A stronger greenback reduces oil demand, making crude more expensive for investors holding other currencies.

Next week, however, the rally could resume as easing inflation, plans to refill the U.S. strategic reserve, supply cuts and disruptions could support the market, said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.

"While oil prices are likely slightly overbought in the very near term, touching the highest levels since early May, the bias appears to be for a grind higher," Haworth said.

Oil prices gained nearly 2% on a weekly basis, after supply disruptions in Libya and Nigeria heightened concerns that the markets will tighten in coming months.

Separately, Shell suspended loadings of Nigeria's Forcados crude oil owing to a potential leak at a terminal.

The Libya disruption is halting an estimated 370,000 barrels per day (bpd) while the loss from the Nigerian outage is pegged at 225,000 bpd, said PVM analyst John Evans.

Russian oil exports have also decreased significantly and, if this trend continues next week, it would probably drive prices up further since Russian oil exports are set to be reduced by 500,000 bpd in August, added Commerzbank analysts.