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UPDATE 5-Oil falls 2 percent on economic woes

Published: 01 Nov 2009 16:59:57 PST

* U.S. consumer spending and sentiment dip

* Dollar firms with more data in focus after GDP cheer

* Equities take hit after Thursday gains

(Updates prices, adds detail throughout, change dateline from LONDON)

NEW YORK, Oct 30 - Oil prices fell 2 percent toward $78 a barrel on Friday, pressured by bearish economic data that dented confidence about a potential recovery in energy demand

Weaker U.S. consumer sentiment in October and consumer spending cuts in September served as a reminder that the economy is still struggling, following Thursday's optimism about U.S. GDP growth in the third quarter.

U.S. crude for December delivery fell $1.59 to $78.28 a barrel by 12:15 p.m. EDT (1615 GMT). London Brent crude slipped $1.57 to $76.47.

"There is some weakness after Thursday's exuberance over GDP data in light of today's report on the stressed consumer," said John Kilduff, co-chief investment officer and partner at hedge fund Round Earth Capital.

U.S. consumer spending fell 0.5 percent in September, the first fall in five months, according to data from the Commerce Department released Friday.

And in October consumer sentiment slipped as Americans continue to worry about their finances, the latest Reuters/University of Michigan consumer survey showed on Friday.

Higher equities and a weaker dollar have pushed crude prices higher up 12 percent so far in October as investors look to wider macro economic data for signs of economic recovery and a potential rise in energy demand.

A stronger U.S. dollar against the euro contributed to oil's losses on Friday, analysts said. Oil prices tend to fall when the dollar rises as it makes the dollar-denominated commodity more expensive for holders of other currencies.

U.S. stocks extended losses on Friday after their best gains in three months on Thursday.

BRIMMING INVENTORIES

Exxon Mobil Corp, Royal Dutch Shell Plc and Eni SpA dashed hopes for an imminent turnaround for the oil industry on Thursday, saying sluggish economic recovery was weighing on energy demand and prices.

Chevron Corp also posted a 51 percent drop in quarterly profit on Friday.

Bearish comments from oil firms followed data on Wednesday showing a surprise build in U.S. gasoline inventories.

Global oil product stocks stored at sea are also brimming, with floating storage estimates near 80 million barrels.