UPDATE 3-Oil falls below $72 as equities slip, dollar rises

                                
 * Oil falls on risk aversion
                                
 * Positive economic data to support
                                
 * Dollar index rises slightly off near year-lows
                                
 
                                
 (Updates prices)
                                
 By Chris Baldwin
                                
 LONDON, Sept 18 (Reuters) - Oil prices fell below $72 a
barrel on Friday as Asian and European stocks slipped off their
multi-month peaks and a battered U.S. dollar found some respite.
                                
 Analysts said a lack of conviction that the global economic
downturn was coming to an end was dragging down oil as well as
equities markets on expectations fuel demand could stay weak.
                                
 "Both equities and oil are reacting to economic indicators
and it seems there is a little bit less optimism at the end of
the week," said analyst Richard Gorry at JBC Energy in Vienna.
                                
 U.S. crude for October delivery <CLc1> fell 58 cents to
$71.89 a barrel by 1130 GMT, after touching as low as $71.27 in
earlier trade.
                                
 London Brent crude <LCOc1> fell 58 cents to $70.97.
                                
 European equities slipped on Friday from an 11-month peak
scaled in the previous session, pressured by financial and
commodity shares as recent hefty gains prompted investors to
book profits. [ID:nLI126467]
                                
 Japan's Nikkei index <.N225> fell 0.7 percent, breaking a
three-day rally as investors stepped cautiously ahead of a
stretch of public holidays, even as a Bank of Japan deputy
governor said a positive business cycle had begun. [ID:nT109247]
                                
 The ICE Futures U.S. dollar index, which tracks the value of
the greenback versus a basket of six major currencies, rose
slightly on Friday from a near one-year low touched on Thursday,
as investors covered short positions after the dollar's sharp
slide and softer equities cooled risk appetite.
                                
 Recovery hopes in the U.S. and the prospect of low U.S.
yields and fiscal deficit concerns have fuelled dollar selling
this month, sending the index <.DXY> down 2.4 percent in
September, its worst monthly performance since May.
                                
 Oil has tracked equities markets closely in recent months as
dealers look to stocks as a leading indicator of an economic
recovery that could boost ailing energy demand.
                                
 Some analysts said oil prices could move higher in coming
weeks as some recent positive economic data supported
expectations that a global economic revival was under way and
energy demand would soon recover.
                                
 "Commodity correlations are volatile by nature, and so one
needs to be cautious in drawing conclusions from short-term
movements," analysts at Barclay's Capital wrote in a their
Commodities Research note.
                                
 "Momentum is starting to build for a break to the upside as
there is mounting evidence of an improving global economy in
general."
                                
 Crude is up nearly 62 percent this year, but is still about
51 percent off its July 2008 record of more than $147.
 (Additional reporting by Fayen Wong in Perth; editing by James
Jukwey)