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Oil falls on ample supply, China data ahead of U.S. jobs report

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[May 02, 2014]  By Elizabeth Dilts

NEW YORK (Reuters)  U.S. oil futures edged lower on Thursday as inventories soared to record highs and traders awaited Friday's U.S. jobs numbers, while Brent oil was pressured by muted Chinese economic data and expectations for a rebound in Libyan oil exports.

The U.S. Labor Department is expected to report 210,000 nonfarm payroll jobs were added in April, according to a Reuters survey of economists, which would be supportive for crude oil demand even as domestic inventories rose again last week.

However, data released Thursday showed an unexpected rise in unemployment claims last week, causing trepidation ahead of the report, which is scheduled to be released Friday at 8:30 a.m. (1230 GMT).

In China, the world's second-largest oil consumer, April factory activity rose marginally but export orders fell, which reinforced worries that economic growth will continue to slow.

Adding further pressure on Brent, Libya's Zueitina oil port was said to have begun loading its first tanker of crude Thursday after being closed for nearly 10 months.

Other economic data out Thursday showed U.S. consumer spending rose in March and factory activity accelerated, capping losses in U.S. crude.

Brent crude settled down 31 cents at $107.76 a barrel, after falling by as much as $1.22 to an intra-session low of $106.85, the weakest since April 8.

U.S. crude settled 32 cents lower at $99.42 a barrel, after falling by $1 to $98.74 earlier in the session, where it found support at the 100-day moving average.

The U.S. Energy Information Administration on Wednesday said U.S. crude stocks rose last week to just under 400 million barrels, the highest since 1982. That increase pressured U.S. crude, widening its discount to Brent <CL-LCO1=R> to $8.44 on Thursday.

"The supply in the U.S. is very strong," said Carl Larry, CEO of consultancy Oil Outlooks. "The only thing that can turn the market around is more job creation, which would be a strong signal that demand would rise. Jobs equate oil demand."

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Seasonal sell-offs in U.S. gasoline and news that the Port Arthur Refinery was increasing output sent front-month RBOB prices 2.6 cents lower to $2.9384 per gallon, which also put pressure on U.S. crude.

"U.S. crude oil is a bit over-sold and in the last couple days of April many funds sold off long positions in RBOB" which removed some of the support for U.S. crude prices, said Richard Ilczyszyn, chief market strategist and founder of iitrader.com LLC in Chicago.

Violence in eastern Ukraine and traders' anxiety that this could lead to disruptions to Russian oil supply set the floor and prevented bigger moves to the downside, analysts said.

"With all the geopolitical risk and demand for refined products, we'll see (U.S. crude) stay in this range between this $98-$97 area," said Ilczyszyn

(Additional reporting by Alex Lawler in London and Florence Tan in Singapore; editing by Alden Bentley and James Dalgleish)

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