In May, payrolls fall by 345,000, less than expected NEW YORK (MarketWatch) -- Oil futures turned lower Friday after soaring to a seven-month high earlier as the government reported that 345,000 payroll jobs were lost in May, a significant number but much lower than what was expected by analysts. Crude oil for July delivery was last down 48 cents, or 0.7%, to $68.32 a barrel in electronic trading on Globex. Earlier, crude futures had soared to an intraday high of $70.32 a barrel, the highest level in seven months, after the Labor Department reported Friday that the U.S. unemployment rate jumped to a 26-year high of 9.4% in May as 345,000 payroll jobs were lost. Read more. The decline in payrolls was the smallest since September, and much lower than the 500,000 expected by economists surveyed by MarketWatch. Payrolls had lost an average of 643,000 in the previous six months. "[It's a] reality check," said Phil Flynn, senior analyst at Alaron Trading in Chicago. "The non-farm numbers were good, but the overall number is disturbing. After the spike, [there's] a little sobering profit-taking." On Thursday, July crude prices climbed $3.03, or 4.6%, to $69.15 a barrel on the New York Mercantile Exchange as a bullish oil-price forecast issued by Goldman Sachs boosted sentiment. Goldman increased its 2009 oil price forecast to $85 a barrel, up from $65 a barrel previously, while the U.S. Labor Department reported data showing the number of continuing claims for state unemployment benefits has finally declined in the latest week, breaking a recent string of record highs. Weak fundamentals Oil prices have rallied 60% over the last three months, but analysts say that market fundamentals remain weak and a correction might be on the cards. "Demand destruction is still a topic in the market," said analysts at Credit Suisse. "At the same time, OPEC production has started to grow again. We think price risks are skewed to the downside." Analysts at Commerzbank are also skeptical about further price gains for crude oil and expect a sharp price correction to below $60 a barrel soon. "However, a short price spike above the $70 a barrel mark is possible, as this level attracts significant speculative interest," they said. "We are particularly concerned about the relatively weak demand, high inventory levels of crude and the fact that OPEC member states are likely to expand their production at prevalent price levels." Edward Meir, an analyst at MF Global, said that "for now, it is inadvisable to stand in the way of what seems to be investor money clearly piling into commodities." "Buyers are hoping that an imminent global economic recovery, coupled with continued weakness in the dollar, will eventually improve the currently weak fundamentals," Meir said in a note to clients. Also on Globex, July reformulated gasoline rose 2 cents to $1.98 a gallon and July heating oil gained 2 cents to $1.80 a gallon. July natural gas futures added 6 cents, or 1.5%, to $3.867 per million British thermal units.

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