U.S. crude oil slipped below $72 a barrel on Friday, snapping a three-day winning streak as investors questioned whether the pace of demand recovery justified current prices.
U.S. crude for October delivery was down 13 cents at $71.81 a barrel by 0942 GMT. London Brent crude fell 3 cents to $69.83 a barrel.
"The whole environment seems to be very positive but the market needs at some point to take a step back and ask whether these kinds of fundamentals are really supportive of these kinds of prices," said Commerzbank analyst Eugen Weinberg.
Oil hit a year-high of $75 a barrel in late August, from below $33 a barrel in December, as global oil demand recovered.
The International Energy Agency said it expected oil demand to rise this year and next as the global economy recovers, but also said oil stocks in the big developed countries of the OECD were up 4.6 percent in July versus a year ago.
Weinberg said the IEA's oil stock data indicated that crude prices might not justify fundamentals and was weighing on crude prices.
"(It's) also a question of current oil stocks world wide, which are still at very high levels," he said.
The Energy Information Administration reported U.S. crude inventories fell by a larger-than-expected 5.9 million barrels last week.
But inventories of gasoline and middle distillates rose, and analysts said the oil products supply build likely would offset the bullish impact of the large crude draw.
DOLLAR WEAKNESS
The dollar index, a measure of the U.S. unit's performance against six other major currencies, has dropped 1.9 percent in the past week, and on Friday briefly fell as low as 76.548, its lowest since September 2008.
The secretary-general of the Organization of the Petroleum Exporting Countries, which met in Vienna this week, said the falling dollar had become a concern for the group and could necessitate higher oil prices.
The dollar's slide has helped crude gain more than 5 percent so far this week, but an analyst at Commonwealth Bank said oil was unlikely to get much more upward momentum from the greenback.
"Our forecast for currencies is for dollar depreciation — a lot of that has occurred already and while depreciation has been an upside driver, that influence may be weakening," said David Moore, commodities strategist at Commonwealth Bank in Sydney.
Meanwhile, data showed China's crude oil imports in August surged about 25 percent to a near record high of 19.6 million tonnes or around 4.6 million barrels, data showed on Friday.
At its meeting in Vienna this week, OPEC kept output unchanged, as many analysts had expected, but signalled compliance with output curbs would become a greater focus.
