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Brent hovers above $108 as economic worries deter investors

Wednesday, 3 Oct 2012 | 11:04 PM ET

* Jittery investors await U.S. job data, watch Europe

* Social unrest in Iran, Turkey-Syria clashes in focus

* Coming up: ECB policy meeting; 1400 GMT

By Ramya Venugopal

SINGAPORE, Oct 4 (Reuters) - Brent futures steadied above $108 a barrel on Thursday after a sharp drop in the previous session, with investors waiting for a European Central Bank policy meeting and critical jobs data out of the United States this week for more trading cues.

Concerns about weak oil demand stoked by data from China suggesting a delayed recovery and from the euro zone pointing to recession dragged markets lower on Wednesday, pulling down Brent futures by 3 percent.

"The markets have reacted primarily to what appears to be a steady stream of weak economic data out of China and the euro zone as well; the fundamentals point to near-term weakness," said Victor Shum, a senior partner at oil consultancy IHS Purvin & Gertz in Singapore.

"In the immediate term, some investors could see a buying opportunity after the sharp drop yesterday, so there could be a turnaround today."

Front-month Brent futures added 23 cents to $108.40 per barrel at 0244 GMT. Brent fell to $107.67 on Wednesday, their lowest since Sept. 20 and could find support at $106.69.

NYMEX crude for November delivery rose 8 cents to $88.22 a barrel. It had plunged 4 percent on Wednesday in its biggest daily drop since June 21.

Even as economic worries in Europe and China kept investors jittery, data from the U.S. offered a ray of hope, with private employers adding more jobs than expected in September and new orders helping a pick-up in the service sector.

This data precedes more-widely followed jobs numbers from the U.S. Labor department on Friday, which is expected to show a slight improvement from the previous month.

Employers are expected to have added 113,000 jobs to their payrolls, an increase from 96,000 in August, with the unemployment rate edging up by a tenth of a percentage point to 8.2 percent, according to a Reuters survey.

In Europe, policymakers at the ECB may focus on whether to lower interest rates to support a recession-bound economy.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Brent 24-hr chart analysis: WTI 24-hour chart analysis: ECB policymakers at a glance: ADP/US Labor Dept comparison: Markit PMIs: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> WEAKNESS EVERYWHERE

Economic worries remained in the forefront of all asset markets this week as a series of surveys across the world pointed to increasing weakness, casting doubts over the still-fragile recovery.

Wednesday's data showed that the service sector in the euro zone has declined even further, diminishing chances that the region will see growth before next year.

Even China's normally robust services sector weakened to a two-year low in September, as the impact of the slowdown in the export-focussed nation's biggest customers hit home.

The service sector data came on the heels of manufacturing numbers earlier in the week, which showed factory activity in the euro zone fell to its lowest since early 2009, while China showed signs of having lost its growth momentum.

Besides growth concerns, investors are also fretting about the deepening euro zone crisis. Greece is struggling to strike a deal with its lenders on disputed austerity cuts, while Spain is expected to be the next nation to request a bailout.

Over the next five weeks, "oil prices might be weaker, dominated by uncertainties and concerns over Spain, further concerns on whether the Chinese economy is stabilising or sliding, and by a general sense of economic inertia", Barclays analysts said in a report.

After five weeks, oil markets will be driven by the outcome of the U.S. presidential election and geo-political concerns, they added.

IRAN, SYRIA

Geo-political concerns include the still simmering dispute in the Middle East over a nuclear program in Iran that triggered tough sanctions from the United States and the European Union and plunged the Iranian rial to a record low this week.

Adding to the tensions is social unrest in Iran over the weakening currency, the proverbial last straw for its citizens who are already reeling under the impact of the sanctions.

Elsewhere, Turkey's military hit targets inside Syria after mortar bomb fired from Syrian territory killed five Turkish civilians, marking the most serious cross-border escalation of the 18-month uprising in Syria.

(Editing by Himani Sarkar)

((ramya.venugopal@thomsonreuters.com)(+65 6870 3826)(Reuters Messaging: ramya.venugopal.thomsonreuters.com@reuters.net))

Keywords: MARKETS OIL/