Oil prices fell on Friday as a stronger U.S. dollar and doubts over the pace of economic recovery halted the commodity's recent rally.

The dollar <.DXY> gained against a basket of other currencies, while the S&P stock index <.SPX> fell 1 percent, as weak industrial sector earnings made investors question the pace of an economic recovery.

Oil is holding around $80 but the decline in equities markets and a stronger dollar mean the rally in oil prices has been stalled for now, said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

U.S. crude for December delivery dropped 52 cents a barrel to $80.67 by 1620 GMT, while Brent crude dropped 53 cents to $78.98 a barrel.

Oil prices had risen to a one-year high of $82 earlier this week, after rallying 17 percent since October 10. The surging prices coincided with a rise in global stock indices and a weak dollar, which plunged to a 14-month low against a basket of currencies this week.

Oil, priced in dollars, remains cheap for holders of foreign currencies and has been moving in an inverse price relation against the dollar.

Optimism for an economic recovery spurs investment in traditionally riskier assets like oil and stocks. That has helped crude prices rise even though oil inventories remain well above average levels.

The 'traditional fundamentals' are improving, but only slowly, according to a Friday research note from Deutsche Bank global oil economist Adam Sieminski.

Disappointing third-quarter earnings from industrial companies like oilfield services giant Schlumberger and chip-maker Broadcom Corp triggered uncertainty over the pace of economic recovery, sending U.S. stocks lower.

Data on Friday showed Britain's economy unexpectedly shrank by 0.4 percent in the third quarter, roiling economist expectations for a return to growth from the worst recession in decades.

That followed bearish U.S. economic data on Thursday, which showed a larger-than expected rise in workers filing new claims for jobless aid last week and pressured oil prices.

In addition, OPEC Secretary General Abdullah al-Badri said on Thursday the group, which pumps a third of the world's oil, could consider raising production it meets in December.

Al-Badri, who earlier this week called $80 oil a bit high, said OPEC would only consider raising production levels if oil inventories shrank and there was real economic growth.

Analysts said the OPEC comments could mean more oil supplies are on the way, but it's uncertain whether global fuel demand is increasing enough to warrant more production.

OPEC may want to calm the market with more crude, but it's not clear that refiners have an appetite to take it, Deutsche Bank's Sieminski wrote in a note.

(Reporting by Joshua Schneyer; Additional reporting by Barbara Lewis and Jane Grieve in London, and Nick Trevethan in Singapore; Editing by Marguerita Choy)