Oil fell toward $70 a barrel on Monday, extending the previous session's decline, as strength in the U.S. dollar encouraged investors to take profit from a recent rally.

Oil prices rose over 2 percent last week and touched a five-week high of $72.84 on Friday amid optimism that a potential turnaround in the global economy could boost flagging fuel consumption.

U.S. crude fell 47 cents to $70.46 a barrel by 2305 GMT. The contract settled $1.01 lower at $70.93 a barrel on Friday.

The U.S. payrolls data would have been supportive for crude, but investors are now focusing on the strength in the U.S. dollar, said David Moore, a commodities analyst at the Commonwealth Bank of Australia.

While we'll probably see another bunch of positive Chinese data over the next few days, but the story remains that oil supplies are quite ample at the moment and that could be a key downside risk for oil prices in the near term.

The U.S. index <.DXY> inched lower by 0.07 percent on Monday, after having vaulted higher on Friday as data showed the pace of U.S. job losses slowed last month, adding to recent evidence that the health of the world's largest economy is starting to improve.

U.S. employers cut 247,000 jobs in July, far less than expected and the least in any month since last August, according to a government report, while another report by the Organization for Economic Co-operation and Development also said the economic outlook for the 30-nation OECD area improved further in June.

Wall Street's rally could persist as investor convictions grow that the U.S. economy is on track for recovery. But retailers' results, CPI and other consumer data could cast a pall if shoppers fail to show signs of life. <.N>

Analysts say high crude stockpiles in the United States could rise further in the coming weeks as refineries enter the maintenance season, a trend that could weigh on oil prices in the near term.

Despite a more positive outlook for product margins, we continue to see sizeable risks to the downside for crude in the near-term as weaker demand for crude will add to already weak fundamentals for the complex, JP Morgan's Lawrence Eagles said in a research note on Friday.

Oil prices are not bad at current levels for the Organization of Petroleum Exporting Countries (OPEC), the head of the group said on Sunday, signaling the cartel was unlikely to cut output at a meeting next month.

Crude oil speculators on the New York Mercantile Exchange increased their net long positions sharply in the week to August 4, according to data from the Commodity Futures Commission released on Friday.

(Reporting by Fayen Wong, Editing by Dean Yates)