Oil prices dropped a dollar to below $66 a barrel on Friday after United States unemployment data hardened views economic weakness would sap energy demand and that last month's rally was overdone.
In the latest sign the economy of the world's top consumer was still struggling, data on Thursday showed US employers cut 467,000 jobs in June and the jobless rate rose to a 26-year high. Euro zone unemployment climbed to a 10-year high.
"All the data was bad yesterday," said Rob Montefusco, a trader at Sucden Financial. "Technically, it looks weak at the moment."
US crude fell by $1.22 to $65.51 a barrel, extending the previous session's nearly four per cent drop. London Brent crude fell $1.35 to $65.30. Friday's trading volumes were thin as Nymex floor trading was closed for the US Independence Day holiday weekend.
Oil prices have doubled from a low of $32.40 a barrel in December and they surged by 42 per cent in the last quarter – the largest quarterly gain since 1990.
But some analysts had predicted the market's rise above $70 in June could not be sustained as the economy and energy demand were still weak and oil inventories remained high.
The latest US Government data showed a bigger than expected increase in stocks of motor fuel ahead of the July 4 holiday weekend, typically a time of high demand as the peak of the US summer driving season.
JP Morgan said in a report on Friday it expected oil prices to correct to about $60 a barrel or lower.
Technical analysts, who use past price moves to predict direction, were also taking a bearish view for the immediate term.
They said the breach of the technical target of $66 added to the negative momentum on Friday.
"Risks are shifting for a downside correction toward $60 in the weeks ahead before the larger bull trend resumes," said Barclays Capital technical analysts.
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