(Recasts, updates prices, market activity; new byline, changes
dateline, previously LONDON)

By Gene Ramos

NEW YORK (Reuters) - Oil fell below $75 per barrel
Thursday, extending losses for the second straight session,
as weak U.S. economic data fueled worries about demand in the
world's biggest oil consumer.

The decline erased gains brought on by an upgrade in growth
prospects for Germany, Europe's strongest economy. But prices
remained above the lows touched a day earlier, when data showed
U.S. petroleum inventories soared to a record high.

U.S. September crude was down $1.15 at $74.27 a
barrel at 12:30 p.m. EDT, after hitting a low of
$73.96. ICE front-month Brent fell $1.24, to $75.23.

Brent's premium against U.S. crude dropped back to below a
dollar a day after it rose to $1.39 -- the highest
since early June,

Factory activity in the U.S. mid-Atlantic region contracted
unexpectedly in August for the first time in more than a year,
according to the Philadelphia Federal Reserve.

The U.S. Labor Department reported initial claims for state
unemployment benefits rose to 500,000 in the week ended Aug.
24, more than expected and the higheset since mid-November.

The widely followed leading index of U.S. eeconomic
indicators from the private-sector Conference Board rose 0.1
percent in July, in line with expectations. But the June data
was revised lower to -0.3 percent from the initial report of
-0.2 percent.

"The rise in jobless claims and weaker regional
manufacturing report from the Federal Reserve reinforced the
perception that the economic recovery is wavering and in an
environment of poor fundamentals with (oil) inventories as high
as they are," said Gene Gene McGillian, analyst at Tradition
Energy in Stamford, Connecticut.

The unexpected rise in U.S. jobless claims sent global
markets lower and weakened the dollar, prompting investors to
seek safety in U.S. Treasury debt and gold.

The dollar slumped to near a 15-year low against the yen
. Gold rose to a seven-week high.

"The U.S. is still by far the largest oil consumer
worldwide," said Eugen Weinberg, commodities analyst at
Commerzbank in Frankfurt.

"So a dent in sentiment will keep prices under pressure for
some time, until we see the recovery of the jobs market in the
U.S., because the weak point in the U.S. economy is not
corporate earnings, it's jobs."

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For a graphic on oil's recent trading range, see:

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Oil found support early in the session from a rally in
equity markets in Asia and Europe. European shares rose after
Germany's central bank upgraded its economic growth forecast
for this year.

Analysts downplayed the effect on oil prices of deepening
tensions between Iran and the United States. Ayatollah Ali
Khamenei, the country's supreme leader, said Wednesday that
Iran would not talk with the United States in the current
climate.

U.S. STOCKPILES

Even with Thursday's decline, the U.S. crude benchmark
remained above the six-week low of $73.83 touched Wednesday,
when the Department of Energy said total domestic commercial
petroleum stockpiles last week jumped to 1.13 billion barrels.
It was the highest level since 1990, when the government began
reporting weekly data.

Inventories hit a record despite drawdowns in crude oil and
gasoline storage, prompting analysts to conclude that supplies
were growing faster than demand.

Meanwhile, a report on Thursday from industry data provider
Genscape showed that as of the week to Aug. 17 supplies at the
key Cushing, Oklahoma, delivery hug fell 985,368 barrels to
38.9 million barrels in the week to Aug. 17.

The EIA data on Wednesday showed that crude stored at the
hub fell 687,000 barrels to 37.04 million barrels in the week
to Aug. 13.
(Additional reporting by Robert Gibbons in New York, David
Turner in London, Alejandro Barbajosa in Singapore; Editing by
David Gregorio)