Oil falls to $115 on economic worries, dollar gains

By Matthew Robinson

NEW YORK (Reuters) - Oil dropped $5 to a three-month low on Friday as the dollar surged and concerns about global economic growth weighed on demand expectations.

The fall came even as Russia sent forces into Georgia, a key energy transit region, to repel a Georgian assault on the breakaway South Ossetia region.

U.S. light crude settled down $4.82 to $115.20 a barrel, before falling to $114.90 in post-settlement trade, the lowest level since early May. Prices have slid since hitting a record high over $147 a barrel on July 11.

London Brent crude settled at $113.33, down $4.53.

"It seems that we've got a lot of selling based on the stronger dollar," said Peter Beutel, president of trading consultants Cameron Hanover.

"Energy demand destruction and the dollar return have formed a quiet alliance to bring the oil market down, and today the louder of the two is the dollar."

Strong demand from emerging economies like China sent oil on a six-year rally, with prices up sevenfold at their peak. More support came from investors rushing into commodities as a hedge against inflation and the weak dollar.

But mounting global economic problems and high fuel prices have begun to hurt demand.