We have carried out an ab initio molecular dynamics simulation of liquid oxygen, a molecular fluid in which the individual 02 units carry a molecular magnetic moment. In addition to the atomic and electronic structures, our simulation describes the evolution of the noncollinear magnetic structure. The atomic structure shows a strong preference for parallel alignment of first-neighbour molecules. The magnetic structure shows strong short-range antiferromagnetic correlations, in agreement with spin-polarized neutron diffraction data. The short-range correlations, observed in both the structural and magnetic properties, primarily result from appropriate trajectories of colliding 02 molecules. Our simulation also reveals the occurrence of several long-living 04 units which survive for time periods longer than four times the average residence time observed during collisions.