Oil falls below $66 after bleak U.S. jobs data

By Alex Lawler and Barbara Lewis

LONDON (Reuters) - Oil dropped a dollar to below $66 a barrel on Friday after unemployment data hardened views economic weakness would sap energy demand and that last month's rally was overdone.

In the latest sign the economy of the world's top consumer was still struggling, data on Thursday showed U.S. employers cut 467,000 jobs in June and the jobless rate rose to a 26-year high. Euro zone unemployment climbed to a 10-year high.

"All the data was bad yesterday," said Rob Montefusco, a trader at Sucden Financial. "Technically, it looks pretty weak at the moment."

U.S. crude fell by $1.22 to $65.51 a barrel by 1:18 p.m. EDT, extending the previous session's nearly 4 percent drop. London Brent crude fell $1.35 to $65.30.

Friday's trading volumes were thin as NYMEX floor trading was closed for the U.S. Independence Day holiday.

Oil prices have doubled from a low of $32.40 a barrel in December last year and they surged by 42 percent in the last quarter -- the largest quarterly gain since 1990.

But some analysts had predicted the market's rise above $70 in June could not be sustained as the economy and energy demand were still weak and oil inventories remained high.

The latest U.S. government data showed a bigger than expected increase in stocks of motor fuel ahead of the July 4 holiday weekend, typically a time of high demand as the peak of the U.S. summer driving season.