New York's main contract, West Texas Intermediate for May delivery, tumbled 33 cents to $98.57 a barrel and Brent crude dipped 18 cents to $106.27.

The dollar surged on Wednesday after Janet Yellen said a rate rise could come "around six months" after the Fed's stimulus programme ends. Economists took that to mean an increase in borrowing costs in the first half of 2015, against previous forecasts of a hike in the latter part of the year.

With crude priced in dollars, a strengthening of the unit makes the commodity more expensive, dampening demand.

"US dollar strength was the main weight on the West Texas benchmark as markets extended the reaction to (the) Fed announcement," ANZ bank said, according to Dow Jones Newswires.

Traders are also closely monitoring events in Eastern Europe after Russia absorbed the Crimean peninsula following a controversial referendum slammed as illegal by the West.

US President Barack Obama announced Thursday expanded sanctions against Russian officials, and minutes later the Kremlin struck back with travel bans against US officials and lawmakers, including the leaders of both chambers of Congress.

Russia provides about a quarter of Europe's natural gas supplies, with about 80 percent of those exports travelling through pipelines in Ukraine, analysts say.

Traders fear that an escalation of the crisis would disrupt those supplies.

Analysts also noted that the new US sanctions targeted Russian billionaire Gennady Timchenko, a co-founder of Gunvor, one of the world's largest independent commodity trading companies involved in the oil and energy markets.

"Gunvor is one of the world's largest commodity traders," CMC Markets Singapore said in a market commentary.

"Russian President Vladimir Putin is rumoured to have investments in the company and direct links to Timchenko's energy activities," it said.