Oil fell more than $1 on Monday to below $80 a barrel, tracking a firming U.S. dollar which rebounded from recent record lows.

U.S. crude fell $1.32 to $79.90 a barrel by 10 a.m. EDT, extending losses from its previous session. London Brent crude was $1.44 lower at $77.46.

Stronger-than-expected jobs data out of the United States last week calmed fears about a slowdown in the world's biggest economy, dimming hopes of a further cut in interest rates and helped the dollar bounce back from its recent record lows.

Oil rose to a record high of $83.90 a barrel on September 20 on the back of the U.S. greenback's weakness, helped along also by increased fund flows into the commodity.

Speculators on the New York Mercantile Exchange crude oil market increased net long positions in the week to October 2, the Commodity Futures Trading Commission said last week.

Investors said the oil market's fundamentals showed that it could still head higher despite recent losses, citing continuing strong demand and poor growth from non-OPEC supplies.

The most likely situation we are in is that we're going to see oil price average $70 for the rest of the year... We think there is a 30 percent chance that we will see some sort of decisive assault on $100, said Tim Guinness , chairman of Guinness Atkinson Asset Management.

Investment bank Goldman Sachs last month forecast oil prices could surge to $95 by the end of 2008 and estimated the average price next year at $85 a barrel.

But other analysts have cautioned that the U.S. housing slump and credit market woes could tip the U.S. into a recession that would adversely impact its oil demand growth.

Nobuo Tanaka, executive director of the International Energy Agency, said on Monday that high oil prices would also take their toll on the economies of Asia.

If the prices are going very high, certainly it has a negative impact on the economy, he told Reuters. That is for sure.

In a bid to ease prices which leapt to a record $83.90 last month, the Organization of the Petroleum Exporting Countries (OPEC) agreed to raise output by 500,000 barrels per day from November 1.

(Additional reporting by Fayen Wong in Sydney)