Oil slid for a second day in choppy trade on Friday, with Brent heading for its biggest two-day drop in a year as the U.S. dollar rallied and traders feared slower oil demand in China and diminished investor demand in the United States.

Crude fell for a third session after Federal Reserve Chairman Ben Bernanke on Wednesday laid out a strategy for paring back monetary stimulus. U.S. crude futures fell through 50- and 100-day moving averages, even as U.S. equity markets stabilized after two days of sharp losses. Brent took two-day losses to nearly 5 percent.

"Without quantitative easing and strong China demand, the oil bull story evaporates," said Phil Flynn, energy analyst at Price Futures Group in Chicago, Illinois.

Brent fell more than $2 to hover just above $100 a barrel, then pared losses to close down $1.24 at $100.91 a barrel.

Front-month U.S. crude, or West Texas Intermediate, fell more than $2 in early trade, then settled $1.45 lower at $93.69 a barrel.Second month WTI traded down $1.52 to $93.63. Trading volumes on Brent and WTI were slightly above the 30-day average.

The spread between Brent and U.S. crude narrowed to $7.22, after hitting a session low of $6.54, its narrowest since Nov. 2011.

"We dropped nearly $6 in less than three days, so you're seeing some profit-taking from shorts covering," said Gene McGillian, analyst with Tradition Energy in Stamford, Connecticut.

"The selloff was probably overextended," he said, noting that U.S. crude has been trading between $92 and $97 for the last two months.

Contracts further out on U.S. crude's trading curve fell more than near-term WTI contracts, steepening the premium for near-term months, a condition traders call backwardation.

Emergence of new pipeline capacity to drain inventories from the Cushing, Oklahoma delivery point for the U.S. contract, should ease a glut of U.S. crude in the Midwest. Expectations that supplies at Cushing will fall has supported front month prices relative to later months.

In addition, analysts said expectations of tighter Fed policy helped pressure prices further out on the futures curve.

"There's an immediacy to exit farther-out contracts. There's going to be less inflation, and you don't want to be long crude if economic conditions are going to tighten and the dollar's going higher in the long-term," said Bill Baruch, senior market strategist at iitrader.com in Chicago, Illinois.

Bernanke's plan for slowing stimulus also strengthened the U.S. dollar, making it more expensive for holders of other currencies to buy dollar-denominated oil.

Money managers raised their net long U.S. crude futures and options positions in the week to June 18, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.