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Muted protests in Saudi Arabia contributed to the sell-off by investors who had been spooked by plans for "day of rage" demonstrations in the world's top oil exporter. Funds have bailed out of oil markets for the past several days after lifting their positions to a record high as of Tuesday.

U.S. heating oil and gasoline futures held up better than crude, receiving support from expectations that Japan will require more fuel imports after the quake and tsunami affected about a fifth of its capacity.

Brent crude futures for April delivery fell $1.59 to settle at $113.84 a barrel, losing 1.8 percent on the week, the first loss in seven weeks and biggest since November.

U.S. crude futures for April delivery fell $1.54 to settle at $101.16 a barrel, off a low of $99.01. It fell 3.12 percent on the week, its first weekly loss in four. Trading volume was light, however, at about 670,000 lots, nearly a third below the average of the past month.

The U.S. front-month heating oil crack spread, or refining profit margin, rose $1.21 to $26.39 a barrel at 4:45 p.m. EST, while the gasoline crack spread rose 67 cents to $24.79.

"From an oil pricing perspective, the situation in Japan is likely to result in a negative impact on crude oil prices and a positive for refined products," said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

Japan was hit by a magnitude 8.9 earthquake, the largest since observations began in the late 19th century.

Top Japanese refiner JX Nippon Oil & Energy Corp (JXHLY.PK) halted operations at three plants and fire engulfed a storage tank at a unit of Cosmo Oil Co (5007.T).

MIDDLE EAST PROTESTS

The Japanese quake triggered across-the-board selling in commodities as funds who had piled into markets that were at or near record highs took profits in the face of uncertainty.

Speculators' net-long positions in U.S. crude futures rose to a record high in the week to March 8, the Commodity Futures Trading Commission said in a report on Friday.

Traders also pared positions on signs that a security clampdown in Saudi Arabia's capital kept a lid on a planned protest, even as demonstrations and unrest continued to rumble in nearby Kuwait, Bahrain and Yemen.

Fighting continued in OPEC-member Libya. Rebels repelled a counter-offensive by leader Muammar Gaddafi's forces, but appealed to foreign powers to impose a no-fly zone to stop further attacks. Most analysts have now written off any chance of a quick return of Libyan production.

CHINA, U.S. ECONOMIC DATA

The biggest earthquake on record to struck Japan on Friday, triggering a roughly 30-foot tsunami that swept away everything in its path, including houses, ships and cars.

Chinese inflation topped expectations in February at 4.9 percent and looked set to climb further in coming months, adding to pressure for another dose of monetary tightening.

Japanese stock futures fell 2.4 percent after the earthquake, but market players said the slide may not be too deep because major cities and manufacturing facilities were not affected. .T

"Had yesterday been a decent day, today would've been the sell-off. Something tells me this is not going to be a big event for our market," said Jamie Cox, managing partner of Harris Financial Group in Colonial Heights, Virginia.

"I'm not sure that the equities markets are the ones that are going to be on ball bearings today," he added. "It is going to be all the commodities markets. Those markets are going to be the ones you have to watch and that is actually good for equities."

Brent crude futures fell 2 percent to near $113, and U.S. crude dropped 2.5 percent to about $100 as the earthquake shut down dozens of plants in the world's third-largest oil consumer.

S&P 500 futures lost 2.5 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures fell 35 points, and Nasdaq 100 futures dropped 6.25 points.

Investors watched the Middle East and North Africa ahead of a planned day of demonstrations in Saudi Arabia that will test whether online calls for protests move to the streets.

Insurer Aflac Inc (AFL.N) fell 3.2 percent to $53.92 in premarket and Berkshire Hathaway Inc (BRKb.N) lost 1.4 percent to $83.79.

On the economic front, investors will monitor U.S. retail sales data at 8:30 a.m. EST 1330 GMT.

Apple Inc (AAPL.O) kicks off sales of its latest iPad model Friday and analysts expect the company to extend its lead in the burgeoning tablet computer market.

European shares hit a three-month low, falling 0.6 percent with sentiment worsening after Japan's earthquake and on growing unrest in the Arab world, but analysts expect equities to bounce back. .EU

Asian shares dipped as weak economic data and spreading Middle East unrest prompted profit-taking.

Fears about the economy and unrest in Saudi Arabia darkened the outlook for equities on Thursday, pushing major indexes below key technical levels.

(Reporting by Chuck Mikolajczak; editing by Jeffrey Benkoe)

Total retail sales rose 1.0 percent, the Commerce Department said on Friday, the largest gain since October and the eighth straight monthly advance. January sales were revised up to a 0.7 percent rise from a previously reported 0.3 percent gain.

Economists polled by Reuters had expected retail sales to increase 1.0 percent last month. Compared to February last, sales were up 8.9 percent.

Excluding autos, sales rose 0.7 percent last month after gaining 0.6 percent in January. That was also in line with economists' expectations.

Consumer s last month overcame a 3.7 percent increase in gasoline prices to spend on a range of goods, including autos, whose sales rose 2.3 percent after rising 1.2 percent in January. Receipts at gasoline stations increased 1.4 percent after rising 1.3 percent in January. Excluding gasoline, sales rose 0.9 percent after rising 0.6 percent in January.

Outside autos and gasoline, consumers also spent on clothing, lifting sales 0.8 percent. Receipts at sporting goods, hobby, book and music stores increased 1.3 percent, while sales at building materials and garden equipment suppliers were up 0.6 percent.

So-called core retail sales -- which exclude autos, gasoline and building materials -- rose 0.6 percent after a 0.7 percent gain in January.

Core sales correspond most closely with the consumer spending component of the government's gross domestic product report. Spending, which accounts for 70 percent of U.S. economic activity, grew at a 4.1 percent annual rate in the fourth quarter, the fastest in more than four years.

(Reporting by Lucia Mutikani, Editing by Andrea Ricci)

The quake struck just before the close of Tokyo stock trading. Japan's Nikkei average .N225 closed at an intraday and five-week low, down 1.7 percent on the day.

The Hong Kong's Hang Seng share index .HSI was down 1.8 percent, and Nikkei futures in Singapore tumbled more than 3 percent. At 6:50 a.m. GMT, Nikkei June futures were down 2.8 percent at 10,075.

The magnitude 8.9 quake shook buildings in Tokyo, causing "many injuries" and triggered a four-meter (13-ft) tsunami, NHK television and witnesses reported.

The yen extended losses against the dollar after the quake, falling to 83.29 yen to the dollar compared with 82.80 before it struck.

Brent crude held near $115 per barrel as investors monitored developments in the Middle East. Forces loyal to Libyan leader Muammar Gaddafi battled rebels at an oil port, while Saudi police fired in the air to disperse protesting Shi'ites.

Oil prices are up by a quarter this year, with most of the gains coming since the Libyan crisis erupted.

While oil prices around this level posed no substantial threats to the world economy or financial markets, the risk that prices may rise to damaging levels has risen substantially, Barclays Capital strategists said.

Chinese inflation in February remained close to 5 percent, suggesting tighter monetary policy may be needed, adding to the uncertainty.

Key stock indexes in Australia .AXJO and South Korea .KS11 closed down more than 1 percent each. The broader Asian market outside Japan was down 1.4 percent, extending its drop by more than 3 percent for the week as fresh outbreaks of violence in the Middle East kept markets on edge.

Weak U.S. economic data spurred some profit taking in shares in developed markets which have enjoyed a handsome run this year, though some bargain buying checked losses.

RISK REDUCTION

Overnight, a weak Wall Street which ended down nearly 2 percent. The S&P 500 .SPX is up by a third since last July. .N

"It is another day of reducing risk across the portfolio. We have had it one way for too long and with big issues hitting, everyone is running to the exit at the same time," Chris Weston, an institutional dealer at IG Markets said.

In credit markets, sovereign credit default swap spreads pushed wider, reflecting the general risk aversion sentiment.

The U.S. government bailout of American International Group Inc in 2008 sent shock waves around the world, and China seemed especially rattled.

The Chinese Insurance Regulatory Commission (CIRC) forced AIG's local operations to open their books on a daily basis after the company's September 2008 rescue, according to a series of U.S. diplomatic cables obtained by WikiLeaks and provided to Reuters by a third party. The regulator then shared the confidential information with local competitors, in part to convince at least one of them to buy the troubled assets.

The cables were based on diplomats' repeated conversations with unidentified AIG executives.

While the regulator's efforts went for naught -- AIG's various Asian operations were ultimately sold in part to MetLife and in part to the public in the IPO of AIA Group -- the cables shed new light on the way the Chinese approach large and troubled foreign companies.

"CIRC appears to be mixing its role as a regulator of China-based insurance companies with intentions to support domestic Chinese insurers," the U.S. consulate in Shanghai wrote in an October 22, 2008 cable.

"That CIRC would coordinate closely with domestic Chinese insurance firms is no surprise, but the situation here appears to take this a step farther, with CIRC actively eliciting information from AIG that would be helpful to AIG's Chinese competitors in acquiring parts of AIG's business."

The Chinese regulator, in a statement, said its actions were appropriate and suggestions to the contrary were "a serious departure from the facts or sheer fabrication."

"During the period when (China) dealt with the global financial crisis, CIRC maintained unhindered communication with insurance regulators of various countries, including the United States, and regulated AIA, AIU and other foreign insurance firms operating in China in accordance with laws and regulations. AIG and its China office never raised the various problems stated in your (news) agency's interview outline."

SUMMONED TO BEIJING

AIG executives told consular officials in Shanghai they were summoned to Beijing the day after the rescue to explain themselves, the speed of the request coming as a surprise.

The next day, AIG told consular officials Shanghai-based regulators threatened to immediately pull the company's licenses if it did not disclose -- and stop enforcement of -- any support arrangements with other AIG units.

The first indication of a more direct purpose came September 25, 2008, when AIG told consular officials the CIRC had had a meeting of domestic insurers to see if any wanted to buy the AIG operations, and at least one said yes. The cable did not disclose who that potential buyer was.

But by October 22 of that year, AIG said the CIRC apparently already had a favorite buyer -- China Life, the world's most valuable insurer.

It remains unclear how far the commission went to arrange or push China Life's candidacy as a buyer. The head of the commission's international department told Reuters in November 2008 he had not heard anything of China Life having any interest, after China Life sources said the company was interested in certain AIG assets in Asia.