Oil prices slipped below $72 on Friday as losses on Wall Street and gains in the U.S. dollar dragged on commodities markets.

U.S. crude for October fell 56 cents to $71.93 a barrel by 12:30 p.m. EDT. 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. <.N>

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 August 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.

(Reporting by Richard Valdmanis in New York, Chris Baldwin in London and Ramthan Hussain in Singapore; Editing by Lisa Shumaker)