U.S. crude for October fell 56 cents to $71.93 a barrel by 12:30 p.m. EDT (1630 GMT). London Brent fell 54 cents to $71.97 a barrel.

The losses came as a report showing U.S. consumer confidence at four-month lows pulled Wall Street stock indexes into negative territory, in turn pushing the dollar up against the euro.

Commodities markets have tended to move in tandem with equities and contrary to the greenback as investors look to stocks as a lead indicator of economic performance and buy resources as a hedge against inflation.

Oil’s losses Friday reverse much of Thursday’s $1.06-gain, made on the back of better-than-expected GDP and jobs data in the United States, the world’s largest energy consumer.

Supporting optimistic sentiment, data on Friday showed U.S. consumer spending rose in July and the U.K. economy shrank slightly less than expected in the second quarter.

“The vast majority of economic data that continues to circulate around the media airwaves is positive and suggestive that the worst is definitely over and the recovery has likely begun in most economies around the world,” said Dominick Chirichella, senior partner, Energy Management Institute, Point Pleasant, New Jersey.

But some analysts said stronger economic data in the short term does not overcome a gloomier long-term outlook.

“Despite our confidence in the recovery process over the next six months, there is precious little indication from the energy side that industrial activity in the U.S. is recovering,” analysts at J.P. Morgan wrote in their Oil Markets Weekly note.

Unsold crude stored in tankers at sea continued to hang over the oil market but had declined since the spring.

Norway’s Frontline, the world’s biggest independent oil tanker shipping group, said it estimated that 40 to 45 very large crude carriers (VLCCs), or around 10 percent of the world fleet, were storing crude oil.

Frontline had told Reuters on Aug. 6 that around 50 VLCCs were being used to store around 100 million barrels of oil, down from a peak of around 60 VLCCs in April.

Aug 28 (Reuters)

The market awaited U.S. Energy Information Administration (EIA) data due at 1430 GMT to see if they would confirm the trend from Tuesday’s American Petroleum Institute (API) figures.

U.S. crude oil for September delivery was down 90 cents at $64.71 a barrel by 1407 GMT, having fallen to a low of $63.76. London Brent crude for September lost 50 cents to $66.37.

The fall followed five days of rises that had pushed U.S. crude oil futures up more than 10 percent in just a week.

“The market has exhausted itself and needs to pause,” VTB Capital analyst Andrey Kryuchenkov said in a research note. “Today, all attention will be on the weekly U.S. fuel inventories.”

U.S. crude oil stockpiles rose unexpectedly last week as domestic refining activity slumped, the API said on Tuesday.

Commercial oil inventories jumped 3.1 million barrels to 349.883 million barrels, reversing a stretch of weekly declines triggered by thin import levels and defying analyst expectations for a 2.1 million barrel drop.

A Reuters survey of 15 analysts forecast the EIA would report a drop in crude oil inventories as slow imports countered a decline in refining activity.

HIGH STOCKS

But refined products supplies were expected to have risen, despite the lower domestic refinery capacity use.

Global oil inventories are at historically high levels, equivalent to around 62 days of forward demand by the industrialised countries of the Organisation for Economic Cooperation and Development (OECD).

Robert Montefusco, broker at Sucden Financial in London, said oil came under additional pressure on Wednesday after disappointing results from U.S. bank Morgan Stanley .

Morgan Stanley reported its third consecutive quarterly loss on Wednesday, saddled with a charge related to repaying government loans and the accounting impact of improvement in its debt prices.

“We are not getting to much help from the stock market,” Montefusco said. “We’ve had some poor figures from Morgan Stanley so that has put pressure on stocks and oil too.”

But data showing apparent oil demand in the world’s second-largest energy user rose for the third month in a row offered some support.

China’s implied oil demand in June rose 1.8 percent over a year ago, Reuters calculations from official data showed on Wednesday.

July 22 (Reuters)