Oil prices dip below $85

NEW YORK (CNNMoney.com) -- Oil prices fell amid choppy trading on Friday, as investors bearish about crude demand shrugged dollar weakness and won out over bullish ones.

What prices are doing: Crude oil prices for May delivery fell 47 cents to settle at $84.92 Friday, reversing earlier gains.

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After upbeat economic data last week, prices surged to as high as $86.62 on Monday, but retreated over the past four trading sessions amid fresh fears about Greek debt and a higher-than-expected build in crude inventories.

Still, prices are up about 70% from this time last year.

What's moving the market: Prices for crude moved higher late Thursday, after retail outlets reported a surge in March same-store sales, marking the seventh straight month of increases.

Also, after several days of gains against the euro and other major currencies, the dollar lost ground on the strong sales news, sending traders away from safe haven currencies such as the greenback into riskier ones.

This helped bolster oil prices, since a weaker dollar makes crude, which is denominated in the U.S. currency, cheaper for foreign investors and tends to boost demand.

But the markets quickly reversed gains on Friday, despite dollar weakness, as investors worried about demand offset bullish ones.

What analysts are saying: Though strong economic news and signs of stability in the Euro zone are welcome, many analysts say crude prices are still too high when compared to historically low demand.

"We're concerned that the pace of demand decline this year is closer to that seen last year than the five-year average," said Tom Pawlicki, a research analyst for MF Global.

And the state of the economies in countries like Greece and Portugal remains fragile. Any signs of instability are likely to threaten oil prices by pushing the dollar higher against the euro. On Friday, Fitch Ratings downgraded a set of Greek bonds, fueling concerns and putting downward pressure on crude prices.

"The ongoing struggles in the world of Greek debt will weigh on oil prices as problems continue to grow," Pawlicki said. "If the trend continues, the euro should accelerate its downward trend and increase systemic risk."

Looking ahead: Traders are keeping a close watch on the Chinese currency story. Treasury Secretary Timothy Geithner has been on a campaign lately to convince the Chinese government to loosen the reins on the yuan.

Many economists say that the currency has been artificially held down to bolster Chinese exports and economy. The country is expected to announce a revision in its current currency policy this weekend, which many analysts see as a positive move for global markets.

Next week, a spate of reports are due out including weekly oil inventories and jobless claims data, as well as retail sales.