Oil fell toward $71 a barrel on Friday, a stronger dollar outweighed a positive demand outlook from the International Energy Agency.

The U.S. dollar was supported by comments from U.S. Federal Reserve Chairman Ben Bernanke indicating that monetary policy might have to be tightened as an economic recovery takes hold.

U.S. crude for November delivery dropped 62 cents to $71.07 a barrel by 12:27 p.m. EDT.

London Brent crude fell 46 cents to $69.31 a barrel.

The oil market today is sort of trying to balance the competing influences -- the dollar and the stock market. But at the end of the day, it looks like the dollar's influence will hold, after the greenback reacted to Bernanke's comments, said Brad Samples, analyst, Summit Energy, Louisville, Kentucky.

It looks like crude futures will remain pressured, counterbalancing the IEA demand forecast.

A weaker greenback tends to support oil because dollar-priced commodities become cheaper for buyers using other currencies.

Adding credence to the dollar, Kuwait's finance minister said on Thursday oil trading would remain in U.S. dollars, the latest denial of a report this week about a move to replace the world's reserve unit with a basket of currencies.

Higher stocks on Wall Street and an upbeat oil demand forecast from the IEA and had boosted oil prices earlier, but those factors were overshadowed by the stronger dollar.

The IEA increased its global oil demand growth estimate for 2010, as well as for the rest of 2009.

U.S. stocks rose Friday as investors were encouraged by upbeat broker comments on key tech companies such as Apple. <.N>

(Additional reporting by Robert Gibbons and Gene Ramos in New York, Emma Farge in London and Felicia Loo in Singapore; Editing by Marguerita Choy)

Ben Bernanke