The price of oil dropped three per cent Thursday on expectations of higher global supplies and the impact of a strengthening US dollar.

U.S. benchmark oil for February delivery fell $2.98 to close at $95.44 US a barrel on the New York Mercantile Exchange. It was the biggest one-day drop in crude since November 2012.

Brent crude, a benchmark used to price international crude used by many U.S. refineries, was down $3.02 to $107.78 US a barrel.

West Texas Intermediate was trading at $95.45, well down from its high last year of $108.42.

Oil was lower for the third straight day after closing above $100 a barrel Friday for the first time since October. Oil had risen because an improving U.S. economy lifted consumption and a spell of cold weather seemed to augur higher demand.

The recent retreat follows reports that an end to protests at a major Libyan oilfield could return 300,000 barrels of daily production to the global market. That has raised expectations that supplies will be ample.

Brighter prospects for the U.S. economy have also raised expectations that the Federal Reserve will continue to shrink its stimulus program, and that has helped boost the value of the dollar. A stronger U.S. currency makes commodities such as oil that are priced in dollars more expensive to buyers using other currencies. That lowers demand and prices.

"Further improvement in the U.S. economy should be supportive of the U.S. dollar and that will continue to play against oil demand in emerging markets," said Olivier Jakob, an analyst at Petromatrix in Switzerland. He highlighted recent protests in Kuala Lumpur, Malaysia, against rising gasoline prices.

In other energy futures trading, wholesale gasoline fell 9.1 cents to close at $2.695 US a U.S. gallon (3.79 litres), heating oil fell 7.8 cents to close at US$2.987 a gallon and natural gas futures for February rose 9.1 cents to close at $4.321 per 1,000 cubic feet.