* U.S. gasoline stocks rise ahead of July 4 holiday
* U.S. employment data implies economy still struggling
* Qatar to raise crude allocations to Asia
(Updates prices)
By Barbara Lewis
LONDON, July 2 (Reuters) - Swelling gasoline stocks and a
far-bigger-than-expected rise in U.S. unemployment drove oil
markets down more than $2 Thursday to below $67 a barrel.
In the latest signal the economy of the world's biggest energy
consumer was still struggling, data Thursday showed U.S. employers
had cut 467,000 jobs in June and the unemployment rate had risen
to 9.5 percent.
U.S. crude fell $2.45 to $66.86 a barrel by 1530 GMT. The
contract settled 58 cents lower at $69.31 Wednesday.
London Brent crude dropped $2.03 to $66.76.
"It shows an economy still in distress that can only be echoed
in earnings reports after the holidays," said Mike Fitzpatrick,
vice president at MF Global in New York.
In addition, analysts cited Wednesday's U.S. government
inventory data that showed gasoline stockpiles in the United
States rose by 2.3 million barrels last week.
Distillates, including diesel, also rose by 2.9 million
barrels, although crude stocks dropped by 3.7 million barrels.
Traders viewed the increase in motor fuel ahead of the U.S.
July 4 Independence Day holiday -- which traditionally marks the
peak of the U.S. summer driving season -- as a symptom of
continued demand weakness.
Some analysts are still relatively bullish, however, and say
the Organization of the Petroleum Exporting Countries has been
very successful in stabilizing the market.
Oil has rallied from a low of $32.40 in December last year to
highs above $70 a barrel in June, although it is only around half
last July's record of more than $147.
Over the second quarter of this year it gained around 40
percent -- the strongest quarterly gain since 1990.
OPEC SUPPORT
"Everybody has been surprised at the effectiveness of the OPEC
cuts," said Angus McPhail of British-based investment firm
Alliance Trust.
"We're in a normalized range somewhere between $60 and $80 in
the current environment, excluding the Iranians kicking off ...
Nigeria etc ... I think that's what we're looking at and it's what
OPEC's looking at too."
Political unrest in oil producer Iran has had little impact on
prices because the oil market is well supplied and there is no
expectation of Iran cutting off supplies.
Militant unrest in OPEC member Nigeria has had a bigger
impact. It has forced the shut-in of an estimated 600,000 to
700,000 barrels per day (bpd).
The involuntary output reduction has improved OPEC's
compliance with production curbs, although discipline has
retreated from a peak of around 80 percent earlier this year.
Reuters' latest OPEC survey assessed compliance at around 72
percent of promised cutbacks totaling 4.2 million bpd since
September.
As output creeps higher, one of OPEC's smallest crude
exporters Qatar told at least two Asian term buyers it will supply
its Marine crude at full contracted volumes for August, compared
with 14 percent supply curbs for July, sources at the firms said
Thursday.
While the West has taken the brunt of the economic downturn,
analysts have been looking to Asia to keep generating fuel
demand.
But the governments of China and India this week both
unexpectedly raised gasoline and diesel prices by as much as 10
percent, potentially capping demand growth.
(Additional reporting by Fayen Wong in Singapore, Timothy Gardner
and Robert Gibbons in New York, editing by Jim Marshall)
