Oil pared early gains above $72 a barrel on Thursday after U.S. retail sales data emerged showing a slightly unexpected fall in consumer spending from the world's largest economy.

U.S. light crude for September delivery was up 54 cents at $70.70 a barrel by 1428 GMT, well down from an earlier high of $72.21. London Brent crude gained 62 cents to $73.51 after rising as high as $74.72.

Sales at U.S. retailers unexpectedly edged down 0.1 percent in July from June, a government report showed on Thursday, casting a shadow over brighter French and German GDP data earlier in the day.

The retail sales data took a bit of the edge off the previous rally, said Tony Machacek, a broker at Bache Commodities in London.

Separately, the number of U.S. workers filing new claims for jobless benefits rose unexpectedly last week by a small amount.

Analysts said this year's lack of a U.S. summer driving season illustrated the parlous state of the world's largest economy, with government data on Wednesday showing U.S. gasoline stocks fell by 1 million barrels against forecasts for a 1.3-million barrel draw.

I think in the end you just need to look at how much Americans are driving to get a sense of how the U.S. consumer is doing, said Harry Tchilinguirian at BNP Paribas oil analyst.

Yesterday's U.S. gasoline number went largely ignored, but it shows gasoline demand cratering to 8.9 mb/d at the very peak of the summer driving season.

EARLY BULLS

Gross domestic product (GDP) in the euro zone's two biggest economies rose by 0.3 percent each in the second quarter against expectations for a decline of 0.3 percent.

The unexpectedly bullish news added to sentiment the worst of the deepest financial crisis in decades is over, particularly after the U.S. Federal Reserve made its clearest statement yet that it sees the recession nearing an end.

This in turn pressured the dollar, as investors moved to riskier assets, including commodities, after the Fed on Wednesday held its benchmark rate near zero and said it would likely keep it there for an extended period to guide the way to recovery.

There's this global good feeling at the moment. It's reverberating through everything, commodity markets equally as well, said CMC Markets analyst James Hughes in London.

U.S. crude inventories rose much more than expected last week on higher imports and lower demand from domestic refiners, U.S. Energy Information Agency data showed on Wednesday.

But forecasts an oil demand recovery is at hand led traders to shrug off the bearish weekly data from the world's biggest consumer of energy.

Analysts at Barclays Capital forecast a bullish upswing in global oil demand, seven times larger than the forecast from the International Energy Agency, although they said there was continuing upside risk.

In the U.S., a swing up in industrial output, consumer sales, final sales and a turn in the wholesale goods inventory argue for an impending sharp change in the underlying dynamic of U.S. oil demand, Barclays Capital said in its weekly oil data review.

(Additional reporting by Maryelle Demongeot in Singapore, editing by James Jukwey)

BNP Paribas Retail