(Bloomberg News) Oil fell in New York, heading for a third weekly decline, on concern that volatility in financial markets will worsen an economic slowdown.

Futures slid as much as 1.7 percent today, ending a two-day climb. Crude has traded from $75.71 a barrel, a 10-month low, to as high as $85.97 in intraday trading this week. Reports today may show manufacturing stalled in the euro region and Greece's economy shrank. Prices surged yesterday after applications for U.S. unemployment benefits unexpectedly slid to the lowest in four months.

"The biggest downside risk is that all this volatility cripples confidence," said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, who predicts oil in New York will average $98 a barrel in the third quarter. "There are continued concerns around Europe and sovereign debt and when you overlay that on weaker than expected macro data, it can cause people to fear for the worst."

Crude for September delivery fell as much as $1.49 to $84.23 a barrel in electronic trading on the New York Mercantile Exchange. It was at $84.30 at 2:42 p.m. Singapore time. Yesterday, the contract gained 3.4 percent to $85.72. Futures have lost 3 percent this week and 7.8 percent in 2011.

Brent oil for September settlement on the London-based ICE Futures Europe exchange dropped as much as $1.01, or 0.9 percent, to $107.01 a barrel. The European benchmark contract was at a premium of $22.73 to U.S. futures, down from a record close of $23.79 on Aug. 10. The more actively traded October future was down 51 cents at $107.31.

European Meeting

French President Nicolas Sarkozy and German Chancellor Angela Merkel plan to meet next week after concern that the euro-area debt crisis will spread rattled French markets. The leaders of Europe's two largest economies will discuss economic governance of the 17-nation euro region in Paris on Aug. 16, according to separate statements yesterday.

The euro extended a weekly drop against the dollar today before reports forecast to show that industrial production in Europe climbed 0.2 percent in May and Greece's gross domestic product declined 0.8 percent in the second quarter. A rising U.S. currency tends to curb investor demand for commodities.

Regulators in France, Spain, Italy and Belgium will impose bans on short-selling from today to stabilize equity markets after European banks plunged. Asian stocks pared earlier gains.

Export Slump

The U.S. trade deficit unexpectedly rose 4.4 percent to $53.1 billion in June from $50.8 billion in the prior month, according to Commerce Department data yesterday. Exports slumped 2.3 percent, the most since January 2009, as overseas demand for shipments of soybeans and plastics to industrial engines and generators decreased.

Confidence among U.S. consumers dropped last week to the lowest since May as high earners, homeowners and those working full time turned more pessimistic, the Bloomberg Consumer Comfort Index showed yesterday.

Crude climbed yesterday after the number of applications for U.S. unemployment payments fell 7,000 in the week ended Aug. 6 to 395,000, the fewest since early April.

Oil in New York may gain next week as U.S. stockpiles decline and fuel demand increases, according to a Bloomberg News survey. Twelve of 29 analysts and traders, or 41 percent, forecast crude will increase through Aug. 19. Last week, 51 percent of respondents predicted a decrease.

Prices may rebound as a "hammer" forms on the weekly candlestick chart, according to data compiled by Bloomberg. Futures rallied about 13 percent in the six weeks after a similar technical pattern in May 2010.