U.S. crude prices edged toward $73 as rallying equities outweighed concerns about the pace of demand recovery in the world's top consumer, the United States.

U.S. crude for September delivery, which expires at Thursday's close, was up 17 cents at $72.59 a barrel at 1420 GMT (10:20 a.m. EDT) after settling $3.23 higher at $72.42 on Wednesday.

The U.S. crude contract for October was down 33 cents at $73.50 a barrel. London Brent crude for October fell by 60 cents to $73.99, after hitting a low of $73.53.

Rallying U.S. stocks and a jump in July leading indicators helped to reverse earlier losses following a surprise hike in the number of U.S. workers filing new claims for jobless benefits.

It's expiration day volatility and the market is trying to decide if October crude should be at what would be a new 2009 high price at the roll over, said Phil Flynn, analyst at PFGBest Research in Chicago.

Data from the U.S. Energy Information Administration had showed U.S. crude stockpiles plunged by a surprise 8.4 million barrels in the week to August 14 against analysts' forecasts for a 1.3 million barrel build. That pushed the market up on Wednesday.

But a consensus began to emerge on Thursday that this was due to a drop in imports rather than genuine signs that U.S. fuel demand was on the rise.

I think now there's a more realistic view of what the U.S. data means. There is still a lot of uncertainty about the economic recovery and how fast it will be, said EGL analyst Andy Sommer.

U.S. crude prices have been volatile this week, trading in a $8 range in response to mixed signals about the pace of economic recovery.

We expect prices to remain volatile, as the overall demand picture remains weak, and as equity markets and the dollar continue to play major roles in influencing trading direction. said David Moore, commodity strategist with the Commonwealth Bank of Australia.

On the supply front, increased oil output to a year-high from OPEC president Angola, flouting agreed limits, has helped stack the odds against any formal change when the producer group meets in September.

Without a sharp slide in crude prices, the producer group is likely to leave its output targets unchanged when it meets on September 9, most OPEC delegates and analysts said.

(Additional reporting by David Sheppard in London and Jennifer Tan in Singapore; editing by William Hardy)