LONDON: Oil prices edged towards 73 dollars on Friday, extending the previous day's rally as the market was buoyed by rising equities and a weakening US dollar, analysts said.

New York's main futures contract, light sweet crude for October delivery, rose 21 cents to 72.70 dollars a barrel in afternoon trade.

Brent North Sea crude for delivery in October gained 34 cents to 72.85 dollars.

Crude futures had rebounded Thursday after two days of losses, lifted by a weaker dollar late in the session and rallying US share prices.

"The catalyst behind the recovery was based as usual on stocks flipping back into positive territory combined with a renewed weakening in the US dollar," said ODL Securities analyst Marius Paun.

Wall Street's blue-chip Dow Jones Industrial Average rose 0.39 percent to 9,580.63 points, ending higher for an eighth straight session and extending its longest winning streak in 28 months.

European equities also rallied Friday, boosted by strong gains on Wall Street as investors digested news that the British recession was not as deep as expected in the second quarter.

London's benchmark FTSE 100 index of leading shares was up 0.98 percent to 4,916.54 points in late afternoon deals.

British gross domestic product (GDP) shrank 0.7 percent in the second quarter of 2009 compared with the first three months of the year, official data showed on Friday.

That was a modest improvement on the previous estimate of a 0.8-percent contraction.

Oil also won support from a weaker dollar, which makes dollar-priced crude cheaper for buyers using stronger currencies and therefore tends to stimulate demand and lift prices.

The dollar fell on Friday against the euro after more strong eurozone economic data, traders said.

Approaching midday trade in London, the European single currency increased to 1.4358 dollars from 1.4345 dollars in New York late on Thursday.

Earlier this week, New York oil had spiked to 75.00 dollars on Tuesday for the first time in 10 months after strong US consumer confidence data, but fell back on profit-taking after failing to break through that key barrier.

Oil lost more ground on Wednesday after official data showed a surprise jump in crude inventories in the United States, the world's biggest energy consuming nation.

The US Department of Energy (DoE) said American crude stockpiles rose 200,000 barrels to 343.8 million in the week ending August 21, confounding expectations for a 600,000-barrel drop.