Prices also came under pressure after a major earthquake struck Japan, the world’s third largest economy still reeling from last month’s earthquake and tsunami.

Brent crude for May delivery dipped 15 cents to $122.16 a barrel by 1612 GMT. It hit a 2-1/2-year high of $123.37 on Wednesday, as violence in the Middle East continued to stoke supply fears.

“The news of another Japan earthquake may have panicked the market and prompted some profit-taking,” said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

There are signs crude futures are taking a breather after the rally to 2-1/2 year highs, but the upward momentum remains intact, McGillian added.

US May crude futures rose 56 cents to $109.39 a barrel, after having hit $109.56, highest in 30 months, helped by US government data showing weekly claims for unemployment benefits fell slightly, adding to signs of a firming labor market conditions.

“At current crude oil prices, the risk is turning more and more to the amount of potential demand destruction,’ Petromatrix’s Olivier Jakob said.

But other analysts pointed to supply uncertainty spawned by unrest in Middle East flashpoints and the conflict in Libya.

Euro zone debt worries and inflation are high on the agenda after Portugal overnight asked for an EU bailout and on concerns that a rise in euro zone interest rates would push up the cost of debt for already highly indebted economies.

“Products futures are high enough that too much more and it could trigger some demand destruction, especially for gasoline, with supplies pretty ample in the US But the Middle East and Libya keep the uncertainty in the market,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.

Oil prices slipped from recent 2-1/2 year highs even after rebels said Muammar Qadaffi forces damaged a pipeline connecting oilfields to the port town of Marsa el Hariga, with analysts noting supply disruptions are already priced in.

Prices are unsustainable at current levels in the absence of other disruptions, said VTB Capital analyst Andrey Kruychenkov.

“We can’t possibly justify a further sustained boost to prices unless unrest erupts in an oil-producing country other than Libya with serious threats to crude supplies,” Kryuchenkov said.

Global equities fell after a strong aftershock rocked Japan and the euro fell against the dollar. US and European stocks fell after the earthquake measuring 7.4 shook northeast and eastern Japan. A tsunami warning was issued for the northeastern coast but later lifted.

European stocks ended down 0.2 percent and the dollar extended losses against the yen. US-dollar denominated Nikkei futures were down 1.6 percent. Japan is the world’s third-largest economy and investors feared the new quake could harm the global recovery.

“Right now I’m waiting to see the extent of the damage, though I’ve been picking through some stocks to see which could be impacted by disruptions,” said Tim Hartzell, who oversees $300 million as chief investment officer for Houston-based Sequent Asset Management.

Hartzell, whose fund invests in Japanese stocks through exchange-traded funds, said he might buy on weakness. “I’m looking at auto manufacturers, and I’m definitely looking to buy Honda if it gets cheap enough,” he said.

European shares had earlier gained after Portugal’s request for aid fostered hopes the region’s debt crisis will be staunched. The pan-European European FTSEurofirst 300 stock index was down 0.2 percent. Portugal’s stock market bucked the trend, with the PSI 20 index up 1.2 percent.

The Dow Jones Industrial Average slipped 49.31 points, or 0.40 percent, to 12,377.44. The Standard & Poor’s 500 Index gave up 3.66 points, or 0.27 percent, at 1,331.88. The Nasdaq Composite Index eased 3.28 points, or 0.12 percent, to 2,796.54.

World stocks as measured by MSCI were off 0.3 percent.

The euro was down 0.5 percent on the day at $1.4268, off a more than 14-month high of $1.4350 touched on Wednesday. Spot gold hit a new record at $1,464.80 an ounce.