Crude oil futures were down more than 2% early Friday at near $87 a barrel, pressured by strength in the dollar and weakness in equities.

Tropical Storm Nate, the second storm in a week in the U.S. Gulf oil and natural gas producing region, appeared to be on a westward course, ducking a direct blow on key infrastructure.

Prices failed to hold a break above $90 a barrel to a one-month high on Thursday, paving the way for crude to find a footing at lower levels while evaluating the near-term economic outlook. The euro fell to a six-month low against the dollar. A strong dollar tends to discourage buying of oil by investors using foreign currencies.

Oil may take its cue from equities throughout the session, as investors handicap the potential for success of the $447 billion economic recovery plan laid out Thursday evening by President Obama to a joint session of Congress. The combination of tax cuts and spending initiatives was more ambitious than some analysts had expected, but it wasn't immediately clear how much of the plan will be ultimately approved by Congress.

"There was more meat there than some people expected, but we'll have to see what gets passed," said Tom Bentz, a principle at BNP Paribas Commodity Futures.

Light, sweet crude oil for October delivery on the New York Mercantile Exchange was down $2.05, at $87 a barrel. Prices hit a high of $89.50 overnight and put in the intraday low so far of $86.29 a barrel recently. Traders said prices could challenge last Friday's low of $85.42.

ICE October Brent crude was $2 lower, at $112.55 a barrel.

Some Gulf oil producers removed non-essential workers from platforms as a precaution against Nate. The latest storm comes as some 200,000 barrels a day of oil production hasn't been fully restored after Tropical Storm Lee.

Prices also are under pressure from a surprise increase in inventories of gasoline and distillate fuel (diesel/heating oil) last week.

The Energy Information Administration said U.S. gasoline inventories rose 200,000 barrels, while stocks of distillates rose 700,000 barrels in the week that much of the eastern U.S. was battered by Hurricane Irene. Analysts had expected gasoline stockpiles to drop 1.7 million barrels and distillate inventories to fall 300,000 barrels.

U.S. commercial oil inventories fell by a larger-than-expected 4 million barrels last week. That would normally be bullish for crude prices, but analysts said the drop was attributed to sharply lower imports due to Hurricane Irene and Tropical Storm Lee, an expected to be rebound in coming weeks.

Reformulated gasoline blendstocks futures for October were 2.5%, or 7.16 cents lower, at $2.8136 a gallon.

Heating oil futures for October were 1.7%, or 5.18 cents, lower at $2.9925 a gallon.