Brent crude oil slid below $107 a barrel on Monday because of a rising U.S. dollar, after reaching a three-month high earlier in the day due to unrest in Egypt that stoked concerns about global oil supplies.
The U.S. dollar rose to a three-year high and was poised for more gains on expectations the Federal Reserve might wind down its massive stimulus programme as early as September.
A strong dollar makes commodities such as oil that are priced in the U.S. unit more expensive for holders of other currencies, typically pushing down prices.
Brent, the European benchmark, was down 87 cents at $106.85 a barrel by 1340 GMT, after hitting $108.04, the highest since April 4. U.S. crude slipped 85 cents to $102.37, after earlier touching a fresh 14-month high of $104.12.
"Oil is at record high levels in dollar terms for emerging market economies such as India, Turkey and Brazil," Olivier Jakob, of Petromatrix in Zug, said.
"For global demand, that will be an issue, because that's where the growth is coming from."
At least 42 people were killed in Cairo on Monday, medical sources said. Islamist protesters angered by the military overthrow of President Mohamed Mursi said they were fired on at the Cairo military barracks where he was being held.
"Although Egypt is not an oil producer, the situation in Egypt could spread to other regions of the Middle East where a significant amount of oil is exported to the consuming world," said Dominick Chirichella of Energy Management Institute.
Any conflict in the Middle East raises worries of disruption to major oil-producing areas or oil shipments.
"The situation is very tense, keeping market participants on edge and adding to recent concerns over the ongoing violence in Syria," said Andrey Kryuchenkov of VTB Capital.
So far, ports and shipping through the Suez Canal - through which a major portion of the world's oil is shipped - have been operating normally.
"It is Egypt's position as a major transit point for global crude oil movements that explains the current concern and geopolitical risk premium assigned to the goings on in that country," said a research note from Standard Bank.
"Barring a substantial escalation of tensions, whereby oil production appears to be threatened ... or more importantly if oil transportation through the Suez Canal and/or SUMED pipeline looks to be disrupted, this geopolitical risk premium should fade in due course."
Data last week, showing top consumer the United States added more jobs than forecast in June, was initially bullish for oil. But the data also cemented expectations the Fed could start winding down its stimulus programme as early as September.
That pushed the U.S. dollar to a three-year high against a basket of currencies.
Investors are also keeping an eye on the euro zone, which must decide on Monday how to keep Greece on a lifeline. Europe remains divided over whether to delay aid payments to Athens in an attempt to force through reforms ranging from sacking public workers to selling state assets.