Oil prices fell below $78 a barrel on Friday after larger-than-expected October U.S. unemployment numbers emerged to shake financial markets.

U.S. crude ($78.62) for December delivery was down, retracing early gains as high as $80.34 in the trading session.

London Brent crude ($75.91) fell.

Government figures released showed U.S. employers cut a deeper-than-expected 190,000 jobs in October, sending the unemployment rate to 10.2 percent, its highest since April, 1983.

Analysts polled by Reuters had predicted a cut of 175,000 jobs, the smallest number for 14 months, and a rise in the overall jobless rate to 9.9 percent.

In early trade market participants sent oil back up to around $80 a barrel in anticipation of bullish data, but the bearish figures crossed a psychological threshold of 10 percent for markets.

"There was a lot of talk early in the market that the number would come in lower, but really we're just kicking the can down the road here, and today's numbers have set risk markets on edge," said David Morrison, market strategist at GFT Global "It's the old cliche, but the 10 percent number really was a key line in the sand."

Oil prices have risen from a low of less than $33 a barrel last December to a high for this year of $82 in October. They were on course to gain nearly 4 percent this week, but market sentiment had been cautious following inventory data earlier in the week showing oil stocks at record supply levels.

Inventories of distillates, which include heating oil and diesel are near their highest levels in 26 years.