* Oil prices fall as OPEC and Russia consider output boost
* Wall St slips as oil slump drags down energy stocks
* Italy, Spain fears boost demand for U.S. bonds
* World shares steady but set for weekly loss (Updates with U.S. afternoon trading)
By Laila Kearney
NEW YORK, May 25 (Reuters) - Growing expectations of increased oil output slammed crude prices on Friday, lifting the U.S. dollar and weighing on energy shares, while political upheaval in Europe and uncertainty over a U.S.-North Korea summit restrained equity markets and boosted bond prices.
Crude oil prices lost roughly $3 a barrel after Saudi Arabia and Russia said they were ready to ease supply curbs that have pushed prices to their highest since 2014.
U.S. President Donald Trump on Friday signalled that a June 12 meeting with North Korean leader Kim Jong Un could still take place a day after he cancelled the planned historic summit.
That seemingly warming volatile relationship did little to increase demand for risk assets, investors said.
"At this point investors are shrugging off Washington headlines because in most cases they won't affect the markets and Washington has a hard time following through what they say," said Arian Vojdani, investment strategist at MV Financial in Bethesda, Maryland.
Most of Wall Street was slightly down as slumping oil prices dragged on energy stocks ahead of a holiday weekend in the United States, which typically leads to low volume.
The Dow Jones Industrial Average fell 89.84 points, or 0.36 percent, to 24,721.92, the S&P 500 lost 10.16 points, or 0.37 percent, to 2,717.6 and the Nasdaq Composite added 10.39 points, or 0.14 percent, to 7,434.82.
Shares of Chevron dropped more than 4 percent, while Exxon fell 2.5 percent and were the biggest drags on the Dow.
The tech-heavy Nasdaq was aided by chipmakers, led by a 2.7 percent jump in Broadcom.
U.S. Treasury yields fell to their lowest level in three weeks as concerns about Italy's new government and a leadership change in Spain boosted appetite for low-risk investments.
Italian Prime Minister-designate Giuseppe Conte began assembling his cabinet on Thursday, with party leaders pushing for an 81-year eurosceptic economist to be given the pivotal post of economy minister. Italy's president, meanwhile, is opposing the appointee.
Political risk also reared its head in Spain, where a threat of no-confidence motions against Prime Minister Mariano Rajoy sent Spanish stocks and bond prices plunging.
The pan-European FTSEurofirst 300 index rose 0.05 percent and MSCI's gauge of stocks across the globe shed 0.33 percent.
While yields on German and U.S. bonds fell amid the uncertainty, there have been few signs of a wide-ranging sell-off in higher-risk assets - Wall Street's volatility index stayed near four-month lows.
"Market reaction to heightened political risk remains reasonably muted," Indosuez Wealth Management global head of economic research Marie Owens Thomsen said.
She cited the example of Turkey and Italy, where a stock and bond sell-off has not spilled much into other emerging economies or euro zone states.
However, worry about Italy kept the euro under pressure against the dollar.
The dollar index rose 0.47 percent, with the euro down 0.5 percent to $1.166.
The dollar has rebounded after touching two-week lows versus a basket of currencies on Thursday, helped by gains against commodity-linked currencies, as oil prices fell.
The Japanese yen weakened 0.14 percent versus the greenback at 109.41 per dollar, reversing gains seen after the summit cancellation.
Elsewhere, worries that investors could shift assets from emerging markets to higher-yielding U.S. bonds have been a major headwind for emerging markets this year. Turkey has been the worst hit.
Additional reporting by Medha Singh, Sujata Rao, Swati Pandey in Sydney; Editing by Nick Zieminski and Chizu Nomiyama