GLOBAL MARKETS-Oil sinks as OPEC deal seen unlikely; stocks dip

* World stocks dip but still up for week

* U.S. bond yields hover near 2-weeks lows

* U.S. stocks down, dragged down by energy shares (Adds oil price settlements, updates prices)

By Caroline Valetkevitch

NEW YORK, Sept 23 (Reuters) - Oil prices tumbled on Friday following signs that Saudi Arabia and Iran continue to disagree over output limits ahead of a meeting next week aimed at freezing production, while energy shares weighed on global stock indexes.

Sources said Saudi Arabia did not expect a decision in Algeria, where the Organization of the Petroleum Exporting Countries and other big oil producers are set to convene for the Sept 26-28 talks.

Brent crude oil shed 3.7 percent to settle at $45.89 a barrel, while U.S. crude slumped 4 percent to $44.48, both paring strong weekly gains.

Concern about global oversupply has depressed oil prices since mid-2014.

Energy shares led declines in U.S. stocks, with the S&P energy index having lost 1.4 percent by late afternoon.

The decline in world stock indexes came as investors locked in gains from earlier this week fueled by optimism that the U.S. Federal Reserve will hold off from raising interest rates in the near term.

"The (equity) market is taking a bit of a breather after a strong week," said Mike Bailey, director of research at FBB Capital Partner, in Bethesda, Maryland.

"Investors are saying markets are already expensive and they've become more expensive this week, so this is a bit of a reversal."

The Dow Jones industrial average was down 105.02 points, or 0.57 percent, at 18,287.44, the S&P 500 had lost 10.11 points, or 0.46 percent, and was at 2,167.07, while the Nasdaq Composite had dropped 27.25 points, or 0.51 percent, to 5,312.28.

MSCI (Frankfurt: 3HM.F - news) 's all-country world stock index shed 0.5 percent but was on track for its biggest weekly gain since mid-July. Europe's STOXX 600 closed down 0.7 percent.

U.S. Treasury yields were down slightly, with benchmark U.S. yields hovering near two-week lows as traders moved to the sidelines following a recent bond market rally.

U.S. benchmark 10-year Treasury notes were up 4/32 in price for a yield of 1.618 percent, down from Thursday. Earlier on Friday, it touched 1.606 percent, its lowest since Sept. 9, Reuters data showed.

In the foreign exchange market, the dollar index was nearly flat. Boston Fed President Eric Rosengren's comments that he believed U.S. short-term interest rates should be raised now provided some support, but the index was near unchanged at 95.481.

The dollar index was on track for its worst week in a month. (Additional reporting by Tanya Agrawal, Barani Krishnan; and Rania El Gamal and Dmitry Zhdannikov in London; Editing by Bernadette Baum and Alden Bentley)