For a second straight day, Daly shot a fabulous round of golf in Germany, going around in 64 to end at 17-under-par through 36 holes, which broke the existing tournament record by a stroke.
The long-bombing Americans round was capped off at the closing par-5 18th, when he drained a 25-foot eagle putt to extend his lead to four shots over young Australian Adam Scott (64), and by five over four others, including Olazabal.
Click Here for John Daly's scorecard.
'It's been a long time since I had a four stroke lead, said Daly following his round. 'In fact, it's been a long time since I won. I still have a sense of what it feels like to win, but it hasn't happened since the Open at St. Andrews.'
That was in 1995.
Daly's best showing this season came right here in Europe, however, when he finished tied for third earlier at the Scottish Open at Loch Lomond.
Yet, starting the day six shots off the overnight pace, it was another who truly blitzed the course on Friday.
Olazabal double-eagled the par-5 11th and made eight other birdies in his round for a 10-under 62 to move to 12-under-par for the tournament.
Had it not been for a lone bogey at No. 10 and a birdie putt which lipped out on the 18th, the gritty Spaniard might have shot 60.
Nevertheless, his superb play puts him in a position whereby he may be able to automatically qualify for the Ryder Cup next month.
Sitting at 18th on the European team points list, Olazabal can make the top-10 only by way of victory this week.
He went a long way towards securing that on Friday.
Yet, Olazabal isn't looking quite that far ahead - yet.
I don't want to consider the Ryder Cup as the first issue, he said. 'I know what I have to do and this is the tournament to do it.'
Click Here for Jose Maria Olazabal's scorecard.
With regard to the Ryder Cup, Olazabal was just part of the big picture on Day 2.
At Nos. 10, 11 and 12 on the points list, Phillip Price, Ian Poulter and Miguel Angel Jimenez each missed the 36-hole cut this week (4-under 140), which has opened the door for automatic qualifying to not only Olazabal, but several others as well.
Most specifically, fellow Spaniard Sergio Garcia (No. 19) shot a second consecutive 67 Friday to move to 10-under for the tournament, while Scotlands Dean Robertson (No. 23) carded a 69 to sit in outright seventh at 11-under, six shots off Dalys lead.
Both of these players are in the same boat as Olazabal ' they must win to get in.
With the top-9 already locked-in for Septembers big event, and No. 10 Price a good bet to get passed, the remaining scenario might be best analyzed this way:
PLAYERS OUT OF RACE:
No. 11) Ian Poulter----Missed Cut
No. 12) Miguel Angel Jimenez----Missed Cut
No. 15) Mathias Gronberg-----Missed Cut
MUST FINISH SECOND THIS WEEK TO AUTOMATICALLY QUALIFY:
No. 13) Andrew Oldcorn------T21 (-8)
No. 14) Andrew Coltart-------T64 (-4)
No. 16) Ian Woosnam------T21 (-8)
MUST WIN THIS WEEK TO AUTOMATICALLY QUALIFY:
No. 17) Robert Karlsson------T44 (-6)
No. 18) Jose Maria Olazabal------T3 (-12)
No. 19) Sergio Garcia------T8 (-10)
No. 20) Thomas Levet-----T21 (-8)
No. 23) Dean Robertson------T8 (-10)
Immediately following Sundays final round, European captain Sam Torrance will announce his final two wild card picks to round out his team of twelve.
Torrance has already publicly stated that Garcia will be one of his picks, should he not automatically qualify.
With Olazabal in the hunt for the tournament, Capt. Torrance now has plenty of other options to consider.
One thing is certain, however. For any of the European hopefuls to win this week, theyll have to catch Daly.
And that might not be so easy.
Click Here for for Full-Field Scores from the BMW International Open.