Oil edged down on Friday from a six-week high as markets looked to upcoming U.S. July employment data for clues on whether the U.S. economy could be emerging from recession.

By 0935 GMT U.S. light crude for September delivery fell 70 cents a barrel to $71.24 after briefly touching as low as $70.91.

It settled 3 cents down on Thursday when lower U.S. stocks and a stronger U.S. dollar helped to pull prices off a six-week high of $72.42.

London Brent crude fell 60 cents to $74.23.

It has been a steady slip to the downside most of the morning. The BOE announcement yesterday put a little bit of gloom into the market, said Tony Machacek, a broker with Bache Commodities in London.

On Thursday the Bank of England took a far bigger step than expected to boost Britain's recession-hit economy and stunned markets by expanding its quantitative easing plan to 175 billion pounds from 125 billion.

WEEKLY GAIN

Oil prices are still on course for their fourth straight up week as economic confidence has grown, boosting riskier assets and knocking the dollar.

For much of this year, oil prices have been unusually closely correlated to stock markets and Friday's bearishness coincided with weaker equities as investors grew cautious before the U.S. non-farm payrolls data.

The market still looks fairly resilient, analysts at MF Global wrote in their daily energy report.

However, at this stage, much rides on what U.S. equities will do over the next few weeks, as they have indisputably been the upside driver for most commodity complexes.

A Reuters poll on Wednesday showed the U.S. jobless rate might hit a 26-year high of 9.6 percent when July nonfarm payrolls data comes out at 1230 GMT on Friday, but an improvement over June with 50,000 fewer jobs lost outright.

FUNDAMENTAL SHADOWS

Oil analysts were also wary of very bearish fundamentals as U.S. inventories have stayed very high and demand has been weak.

Apart from the swollen inventories on land, oil stocks have built up at sea.

The world's biggest independent oil tanker shipping group Frontline on Thursday said around 50 very large crude carriers (VLCCs) were storing nearly 100 million barrels of crude at sea, particularly in the U.S. Gulf and Europe.

We continue to see sizeable risks to the downside for crude in the near-term as weaker demand for crude will add to already weak fundamentals for the complex, said JP Morgan analysts in a weekly oil report.

That said, our longer-term outlook is considerably more positive as the expected boost in demand for the second half of the year will begin to cut back on commercial inventories around the world.

Oil already costs more than twice the level in December when it plunged to below $33, although it is less than half last July's record above $147.

(Additional reporting by Maryelle Demongeot, editing by Peter Blackburn)

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