Oil slipped back after touching a seven-month high over $70 per barrel on Friday as 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.

Oil prices slipped in very choppy trading as traders came in to take profits after the surge, which pushed prices to their highest level since the first week of November.

U.S. crude for July delivery was down 31 cents to $68.50 by 12:13 EST after peaking at $70.32.

London Brent was down 41 cents to $68.30.

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

Analysts say oil prices were driven by macro-economic data from the United States because it is the world's biggest oil consumer and key to global oil demand.

They said the payrolls data indicated that the worst of the downturn was over and reflected two months of increasingly positive economic data, which had helped fuel a broad-based rally across equity and commodity markets.

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 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 Oil producing group, who told Reuters Energy Summit this week that prices could reach $80-$90 per barrel by early next year.

(additional reporting by Janet McGurty in New York; Editing by David Gregorio)

OPEC