Oil prices tumbled on signs that Saudi Arabia and Iran continue to disagree over output limits ahead of a meeting next week aimed at freezing production, while global stock indexes dipped.
Energy shares led declines in US stocks, with the S&P energy index ending down 1.3 per cent, but the S&P 500 and a world stock index registered their best weekly gains in about two months.
Sources said Saudi Arabia did not expect a decision in Algeria, where the Organization of the Petroleum Exporting Countries and other big oil producers are set to convene for the September 26-28 talks.
Brent crude oil shed 3.7 per cent to settle at US$45.89 a barrel, while US crude slumped four per cent to US$44.48, both paring strong weekly gains.
Concern about global oversupply has depressed oil prices since mid-2014.
The day's decline in world stock indexes also came as investors locked in gains from earlier this week fuelled by optimism that the US Federal Reserve will hold off raising interest rates in the near term.
"I just think after a few strong days and a little weakness in energy that folks are taking some profit before the weekend," said Gary Bradshaw, portfolio manager with Hodges Capital Management in Dallas.
The Dow Jones industrial average ended down 131.01 points, or 0.71 per cent, at 18,261.45, the S&P 500 lost 12.49 points, or 0.57 per cent, to 2,164.69 and the Nasdaq Composite dropped 33.78 points, or 0.63 per cent, to 5,305.75.
Facebook shares fell 1.6 per cent and were one of the biggest drags on the S&P. The Wall Street Journal reported that the social media company overestimated viewing time for video ads.
MSCI's all-country world stock index shed 0.6 per cent but rose 2.2 per cent for the week, its biggest weekly gain since mid-July. Europe's STOXX 600 closed down 0.7 per cent.
US Treasury prices rose, with benchmark yields hitting two-week lows as a result of safe-haven demand for bonds due to losses in Wall Street stocks.
I just think after a few strong days and a little weakness in energy that folks are taking some profit before the weekend.
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Treasury prices have risen following the Fed's decision to leave interest rates unchanged and the Bank of Japan's policy change on Wednesday.
US benchmark 10-year Treasury notes were up 4/32 in price for a yield of 1.618 per cent, down more than 1 basis point from Thursday. Earlier on Friday, it touched 1.606 per cent, its lowest since September 9, Reuters data showed.
In the foreign exchange market, the dollar index was nearly flat as investors kept positions tight ahead of Monday's US presidential debate.
The dollar index, which measures the dollar against six major world currencies, was flat on the day at 95.472. It fell 0.7 per cent for the week, its worst weekly performance since the week of August 18.
Gold steadied in a lacklustre session as the US dollar flattened. Spot gold was up 0.03 per cent at US$1,337.01 an ounce.