Oil fell on Friday as traders took profits from a rally to a seven-month high over $70 a barrel after U.S. employment data showed a slower pace of job losses.

A government report said U.S. employers cut 345,000 jobs last month, the fewest since September and far less than forecast, suggesting the economy's severe weakness was diminishing.

Good news at last. At some point we had to start moving to the 300,000-range. After all, we already laid off an incredible amount of people, said Kurt Karl, chief U.S. economist at Swiss Re in New York.

Oil prices seesawed in choppy trade. Breach of the $70-a-barrel mark, the highest level since the first week of November, brought out profit-takers who pushed prices down.

Prices moved up again until the dollar's gain against the yen and euro on the market's positive spin on the payroll numbers exerted downward pressure on the price of oil.

U.S. crude for July delivery settled down 37 cents at $68.44 a barrel. The intraday high was set at $70.32

London Brent last traded down 37 cents at $68.34.

Phil Flynn, analyst at Alaron Trading in Chicago, said the market slipped back after the data on profit-taking after the high above $70.

The unemployment numbers were great in that there were fewer people losing their jobs, but the rate of unemployment rose more than expected. That is disappointing for the market as it raises worries about the long-term prospects in the job market, Flynn said.

Mike Fitzpatrick, vice president at MF Global in New York, said better jobs data was already priced into the market.

And there's growing awareness that higher prices will make any recovery much shallower, he added.

$85 A BARREL

Signs the global economy is starting to pick up are expected to provide support for higher oil prices.

Fuel demand is seen rising in China, the world's second largest oil consumer, given the steady increase in automobile sales and industrial activity, while the recent increase in prices provide an additional incentive.

Oil prices have closed higher over the past two weeks, up sharply from lows near $30 a barrel this winter.

They are still less than half their record peak set last July at over $147 as the recession has cut deeply into oil demand.

On Thursday, U.S. investment bank Goldman Sachs said that a potential economic rebound alongside production cuts by OPEC could propel crude to $85 a barrel by the end of the year and to $95 a barrel by the end of 2010.

This view is shared broadly by the head of the Organization of the Petroleum Exporting Countries producing group, who told Reuters Energy Summit this week that prices could reach $80-$90 per barrel by early next year.

(Additional reporting by Christopher Johnson in London and Lucia Mutikani in Washington; Editing by Christian Wiessner)

OPEC