Oil rose above $69 per barrel on Friday, within striking distance of a seven-month high, supported by a rally in stock markets and expectations that the global economic downturn might not be as severe as expected.

U.S. crude futures gained 4 percent on Thursday on hints of a recovery in demand and analysts said oil could soon test the psychologically important $70-per-barrel level if it saw more positive economic data from the United States.

Markets awaited U.S. non-farm payroll figures at 1230 GMT for further evidence that the recession could be easing in the world's biggest oil consumer.

U.S. crude for July delivery was up 30 cents at $69.11 per barrel by 1138 GMT after peaking at $69.52. The market hit $69.60 a barrel on Thursday -- its highest since early November.

London Brent was up 23 cents at $68.94.

For the time being, U.S. macro data seems to be what is driving crude prices, and not the fundamentals, which look uninspiring at best, said MF Global in its daily energy report.

How long this disconnect will continue is anyone's guess, but for now, it is inadvisable to stand in the way of what seems to be investor money clearly piling into commodities.

$70 PER BARREL

Buyers are hoping that an imminent global economic recovery, coupled with continued weakness in the dollar, will eventually improve the currently weak fundamentals.

Oil prices have risen sharply from lows near $30 a barrel this winter but are still less than half their record peak last July at over $147 as recession has bitten deep into oil demand.

U.S. investment bank Goldman Sachs said on Thursday a potential economic rebound alongside production cuts by the OPEC cartel 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 Oil producing group, who told Reuters Energy Summit this week that prices could reach $80-$90 per barrel by early next year.

Mike Wittner, head of research at Societe Generale, said oil could easily test $70 per barrel if it saw more encouraging macro-economic figures, particularly from the United States.

We could move $1.50 per barrel in a heartbeat, he said.

Given that the market has been moving, not on fundamentals but on macro economic news, a positive surprise with better-than-expected data could easily push the market to $70.

Rising stock markets are supporting expectations that the global economy may begin to recover sooner rather than later.

Japan's Nikkei stock average rose 1 percent on Friday to an eight-month closing high, lifted by resource and energy shares amid a climb in commodity prices. European shares were stronger by midday on Friday, buoyed by mining and oil companies. <.T> <.EU>

(Additional reporting by Sambit Mohanty in Singapore; editing by William Hardy)

OPEC