Oil slipped toward $68 a barrel on Monday as a stronger dollar and weaker equities prompted a retreat from last week's seven-month high above $70.

U.S. light crude for July delivery fell 10 cents to $68.34 a barrel by 11:05 am EDT, down from Friday's seven-month high of $70.32. London Brent fell 9 cents to $68.25 a barrel.

The small losses came as the dollar extended gains against a basket of currencies as stronger U.S. macroeconomic data encouraged expectations of a rise in interest rates.

Wall Street, meanwhile, was headed lower after fast-food giant McDonald's warned that second-quarter profits could be hurt by currency swings. <.N>

U.S. crude and Brent both looked to be settling into a range between $65 and $70 per barrel, traders said, supported by cuts in output by oil producers but undermined by relatively low demand for oil and high inventories in industrialized countries due to recession.

Output cuts by OPEC have helped stabilize prices in the last few weeks but they are not enough to get the market up toward the $75-$80-per-barrel level, said Christopher Bellew, oil broker at Bache Commodities in London.

I think we might be looking at $65-$70 per barrel as a trading range for a while, he added.

$65 PER BARREL

Several members of the Organization of the Petroleum Exporting Countries, most notably its most influential member Saudi Arabia, have said they see around $75-$80 as a fair level for oil prices and one that would encourage future investment in the oil and gas industry.

OPEC members have promised to cut 4.2 million barrels a day of oil from their production levels since September and so far analysts say they have met 75-80 percent of that pledge.

Venezuelan Oil Minister Rafael Ramirez said on Sunday OPEC members were complying with 86 percent of promised cuts. A Reuters survey published last Wednesday said compliance had slipped to 75 percent from 81 percent in March and April.

JP Morgan has raised its forecast for fourth-quarter 2009 U.S. oil prices, this time to $65 a barrel, versus above $55 in their latest monthly energy report in May, on expectations of economic recovery and seasonal factors.

If economic forecasts are right, and we are coming out of the recession, the path for oil is going to be somewhat higher, said Lawrence Eagles, Global Head of Commodities for JP Morgan Chase at the Asian Oil and Gas Conference.

(Additional reporting by Richard Valdmanis in New York; editing by Jim Marshall)

OPEC