Brent crude dipped toward $107 a barrel on Friday and U.S. crude fell below $97, extending losses from a record rout in the previous session that wiped as much as 10 percent from the price.

Brent crude fell $3.21 to $107.59 a barrel by 0747 GMT. Brent settled down $10.39 on Thursday at $110.80 a barrel, the second biggest drop on record and the fourth straight day of losses. At one point it gave up $12, its biggest fall ever.

U.S. crude fell to $96.77, down $3.02 on the day. Early gains in Asian trading were quickly reversed when European markets opened.

People are waking up to a whole new world. This is part of the adjustment process, Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said.

The volatility will stay with us for some time.

The fall on Thursday came amid a global rout across commodities, driven by factors including a stronger dollar and weak economic data from Europe and the United States.

The sheer size of the drop on Thursday shocked traders, and the psychological impact would have pushed some to cut losses regardless of their views on fundamentals.

The instinct is to liquidate. Even if you are a bull, you need to have deep pockets to ride this out, said one Singapore-based trader.

DOLLAR, EMPLOYMENT DATA

A rise in the U.S. dollar also contributed to oil's slide, with the greenback holding on to chunky overnight gains on Friday.

The euro slid against the dollar on Thursday after the European Central Bank hinted interest rates were unlikely to rise next month, short-circuiting a rally that had driven the currency to a 17-month high.

The market focus on Friday will be on the release of U.S. jobs data for the latest pointer to the health of the world's largest economy after weak macroeconomic data contributed to the free-fall on oil markets on Thursday.

U.S. employers probably took on fewer workers in April as high energy prices sapped consumer confidence and led to doubts about the strength of the economic recovery, according to a Reuters survey of economists.

Disappointing U.S. employment data on Friday could push Brent through technical support at $105, said Gordon Kwan, head of energy research at Mirae Asset Securities in Hong Kong.

Brent has fallen below the 50-day moving average and I expect it to be testing $105 a barrel, he said.

Selling by hedge funds seeking to raise cash after suffering losses on silver earlier in the week exaggerated losses.

A lot of hedge funds lost big on silver, and they have to raise cash by locking in profits on oil or gold, said Kwan.

U.S. silver futures have fallen nearly 30 percent this week after the CME Group, in a move to curb speculation, raised margin requirements for the 5,000-ounce COMEX silver futures contract for the fifth time.

The COMEX contracts closed down 10 percent on Thursday, at $35.34 an ounce, its biggest one-day loss since October 2008.

FUNDAMENTALS STILL IN PLACE

Analysts said despite the severe correction, the longer-term bullish cycle for oil was still in place, supported by firm oil demand from China and geopolitical tensions in North Africa and the Middle East.

The geopolitical issues that made oil prices rise so much in the past few months still remain with us, said Victor Shum, an analyst at Purvin & Gertz. I don't see any aggressive exit from oil right now.

The disruption of oil exports from Libya and the weaker dollar sent crude to its highest level since 2008 this year, with U.S. crude over $114 a barrel at the start of May, and Brent topping $127 a barrel in April.

Selling pressure on oil and other commodities came on several fronts this week, with investors weighing factors from the death of Osama bin Laden to the impact of higher fuel and commodity costs on the economies of consumer nations to monetary policy in major economies.

We are still long-term bullish. Despite the weak U.S. economic data, not much has changed fundamentally. We still expect oil demand to outpace supply, and geopolitical tensions will persist and support prices, said Serene Lim, a commodities analyst with ANZ Bank in Singapore.

(Editing by Manash Goswami)

China Libya