(Reuters) - Brent crude fell on Friday, staying below $102 per barrel and extending its May swoon, after weak manufacturing activity data from No. 2 oil user China fueled further selling ahead of a key U.S. employment report.
The latest evidence of a Chinese slowdown dealt a fresh blow to a global economy struggling with a simmering debt crisis in Europe and a faltering recovery in the United States. It also pushed Asian equities and the euro down.
China's official Purchasing Managers' Index eased to 50.4 in May, the weakest reading this year, from a 13-month high of 53.3 in April.
This is another source of selling for oil markets, on top of China not showing much interest in stimulus, said Jim Ritterbusch, president at Ritterbusch & Associates.
China's top policy advisers said earlier this week the country does not need massive fiscal stimulus since aggressive spending now could do longer-term harm.
London front-month Brent crude dropped 17 cents to $101.70 per barrel by 3.05 a.m. EDT. Brent hit a session low of $101.27 on Thursday, its weakest since October and shed 14.7 percent in May - its biggest monthly drop since 2008.
U.S. oil slipped 28 cents to $86.25 a barrel, after losing more than 17 percent last month, also its worst showing since 2008.
The Chinese data comes ahead of the closely watched U.S. employment report, which is expected to show nonfarm payrolls increased 150,000 in May from 115,000 in April.
I don't think Friday's numbers are going to be any better. It's been a dismal week so far, and we haven't hit bottom, said Ritterbusch.
We're going to see more downside pressure on prices, with Brent likely to drop below $100 and WTI expected to dip further to around $83.
Any flicker of hope of a recovery gathering traction in the U.S. economy was snuffed out on Thursday as private payroll growth in the United States barely picked up in May with claims for jobless benefits seen rising.
Brent's premium against U.S. crude was at $15.45. It hit a high near $16 in the previous session, before narrowing after U.S. government data showed that crude oil stockpiles at Cushing Oklahoma, while reaching a new record, edged up only modestly from the previous week's levels.
U.S. crude oil inventories, excluding strategic reserves, rose much more than expected last week to hit their highest level since July 1990, U.S. Energy Information Administration (EIA) date showed.
EURO ZONE CRISIS
Oil prices also came under pressure as worries mounted about the euro zone debt crisis after International Monetary Fund Managing Director Christine Lagarde denied a report that the IMF was considering contingency plans for a Spanish bailout.
The debt crisis has escalated in recent weeks on prospects of a messy Greek exit from the euro zone and worries over Spain's rising borrowing costs. This has dented the demand outlook for commodities and dragged prices down.
The markets are really spooked by the euro zone debt concerns, and it's not just Greece and Spain. By the end of next week we could possibly be talking about Portugal, Ritterbusch said.
It's tough to see any immediate solution because the process in Europe is much more complicated because of the politics involved.
The euro hit a two-year low and was seen at risk of falling further in coming weeks, dogged by worries about Spain.
(Editing by Manolo Serapio Jr. and Himani Sarkar)