Oil fell below $72 a barrel on Friday, a day after reaching a near eight-month high, pressured by a firmer dollar and views that prices have risen too far despite improving economic sentiment.

The market on Thursday settled at $72.68, the highest since October 20 after a three-day rally, making it look overvalued to some analysts. The dollar gained, reducing the investment appeal of oil and commodities.

Most commodity markets are still quite overbought and could be subject to a modest sell-off next week, said Edward Meir, analyst at MF Global. We are getting to a stage where the steep run-up in prices has arguably over discounted the modest brightening we are seeing in the U.S. macro picture.

U.S. crude fell 74 cents to $71.94 a barrel by 1515 GMT (11:15 a.m. EDT). London Brent crude fell 94 cents to $70.85.

The losses came as the U.S. dollar rebounded against the euro. A stronger dollar tends to pressure commodity markets by weakening the purchasing power of buyers using other currencies.

The Organization of the Petroleum Exporting Countries, meanwhile, further reduced its forecast for world oil consumption this year, but said the worst appears to be over for the oil market.

As the world economy stabilizes, the world oil demand appears to be settling down, OPEC said in its Monthly Oil Market Report. There are no significant downward revisions to our previous oil demand forecasts.

Two other closely watched forecasters, the U.S. Energy Information Administration and the International Energy Agency, slightly raised their demand estimates this week, after months of downward revisions.

Stronger-than-expected Chinese economic data helped support prices.

Official figures showed a rebound in China's industrial growth and retail sales in May, following on from U.S. data on Thursday showing an increase in retail sales and a slowdown in weekly jobless claims.

Data also showed refinery output in the world's number two energy user rose 10.7 percent in May versus a year earlier, in its third monthly rise in seven months to a fresh record high.

Concerns over tightening gasoline supplies have given oil an extra boost this week.

U.S. energy firm Valero said on Thursday it will shut its refinery on the Caribbean island of Aruba for the summer due to weak profit margins. The U.S. has already been hit by a spate of refinery outages in recent weeks.

(Reporting by Alex Lawler in London, Chua Baizhen in Singapore, and Richard Valdmanis in New York; editing by Jim Marshall)