Oil dropped below $68 a barrel on Friday, weighed down by a stronger dollar after U.S. data showed the unemployment rate rose by less than expected, albeit to a 26-year high.

By 1318 GMT (9:18 a.m. EDT), U.S. crude was down 23 cents at $67.73 a barrel. London Brent crude dropped 52 cents to $66.60.

We had this move slightly lower, on the back of the dollar. The dollar pared earlier losses and is gaining, said Andrey Kryuchenkov, analyst at VTB Capital. We're still trading on sentiment.

The numbers were in line, Kryuchenkov said of the U.S. unemployment data. (We're on) a very rocky road to recovery now.

Oil prices have traded in a range between about $67 and $69.40 a barrel for three days, and high levels of oil inventories have pushed them down by more than 6 percent since the end of last week.

If crude prices end this week down more than 6 percent, that would be the biggest weekly decline in eight weeks.

High oil inventory levels in many consuming countries have been a concern for the Organization of the Petroleum Exporting Countries, which meets next week in Vienna to discuss output policy.

Most analysts expect the producer group, the source of more than a third of the world's oil supply, will agree to maintain its official output target to keep prices stable around $70.

They will improve compliance and that will support prices in the fourth quarter, Kryuchenkov said.

(Additional reporting by Jennifer Tan in Singapore; Editing by William Hardy)

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