Brent crude futures for September were down 33 cents to $107.69 a barrel by 0838 GMT, after having earlier traded down over a $1 to $106.86.

US crude oil was down 60 cents to $85.12 a barrel after falling over a $1 to $84.02 earlier. In its third consecutive week of decline, the contract is set to fall 2.6 percent against a fall of 9 percent last week.

Traders and analysts said that $1 swings were unexceptional given the levels of market volatility. The decline follows decent gains in previous days.

Concerns about oil demand in OECD countries are weighing on markets following warnings from the International Energy Agency on Wednesday. It said that a 3 percent GDP growth scenario for 2012 would halve the base case 2012 oil demand growth to only 600,000 barrels per day.

"There is still some scepticism around as to whether the fundamentals are strong enough to justify further price increases so some market participants are starting to take profits," said Carsten Fritsch, an analyst at Commerzbank in Frankfurt.

"The market situation has improved somewhat - we have seen rising stock markets and rising metal prices but oil has shown signs of decoupling from this trend, which indicates relative weakness. This is justified given the supply/demand situation."

He pointed to Chinese implied oil demand in July, which was the second-lowest in 2011 and data from France which showed that economic growth ground to a halt in the second quarter as household consumption fell.

The deterioration in the economic growth outlook and the re-emergence of signs of stress in financial markets have created downward pressure on oil, analysts at JP Morgan said in a note.

While JP Morgan retained its view of Brent averaging $110 a barrel in this quarter and $115 in the next due to supportive market fundamentals, it said recent downgrades to economic growth had prompted the bank to reduce its demand growth outlook for the second half of 2011 by about 250,000 barrels per day.

Copyright Reuters, 2010