http://nz.biz.yahoo.com//090702/16/d5zr.html

* 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, adds analyst quote, changes dateline, previous LONDON)

NEW YORK, July 2 (Reuters) - Swelling motor fuel stocks and a far-bigger-than-expected rise in U.S. unemployment drove oil down nearly four percent on Thursday to below $67 a barrel.

In the latest signal the economy of the world's biggest energy consumer was still struggling with a deep recession, data on Thursday showed U.S. employers had cut 467,000 jobs in June and the unemployment rate had risen to 9.5 percent, the highest in nearly 26 years. [ID:nN02549309]

U.S. crude CLc1 settled $2.58 lower to $66.73 a barrel. London Brent crude LCOc1 dropped $2.14 to $66.65.

"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.

Wednesday's U.S. government data that showed gasoline stockpiles in the United States rose by 2.3 million barrels last week also showed the economy was still week, analysts said.

Distillates, including diesel, also rose by 2.9 million barrels, although crude stocks dropped by 3.7 million barrels. [EIA/S]

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 Marguerita Choy)