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Oil slips to USD113 on growth concerns

Wednesday, September 05 15:46:52

Brent crude oil slipped to around $113 a barrel today on worries over economic growth and ahead of a European Central Bank (ECB) meeting expected to announce new measures to tackle the region's debt crisis.

ECB President Mario Draghi is expected to back up his pledge to do "whatever it takes" to save the euro when he presents details on Thursday of a new bond-buying plan designed to ease the deepening euro zone crisis.

But investors are increasingly worried that the ECB may not be able to solve the region's debt crisis, and they see global growth flagging with slowing exports in China and indications of a contraction in the U.S. manufacturing sector.

"Stock markets are down, the euro has fallen and traders are adopting more of a 'risk off' mode," said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt.

Brent crude oil futures for October fell $1.39 to a low of $112.79 per barrel before recovering to around $113.40 by 1415 GMT. U.S. crude futures slid 60 cents to $94.70. Investors awaited U.S. jobs data on Friday for clues on the health of the world's biggest economy. A soft jobs report could strengthen the case for a third round of monetary easing (QE3) from the Federal Reserve when it next meets in September.

Since late 2008, the Federal Reserve has bought $2.3 trillion in long-term securities in a drive to spur growth, indirectly pumping billions into assets markets and injecting huge liquidity into oil and commodities and boosting prices.

Worries about economic growth moved centre stage after data showed that U.S. manufacturing shrank at its sharpest clip in more than three years last month, while separate releases showed exports and hiring in the sector also slumped.

The next test for the U.S. economy will be August unemployment data. The median forecast in a Reuters poll is for a gain of 120,000 jobs, down from 163,000 in July.

The data is crucial as Federal Reserve Chairman Ben Bernanke in a speech at a Fed symposium last week said the weak job market and 8.3 percent unemployment was a "grave concern". Investors were paring expectations from the ECB's Thursday meeting, after driving markets higher on hopes it will detail a bond-buying plan to help out its crisis-ridden members. Germany's Constitutional Court will rule on Sept. 12 whether the euro zone's bailout fund is compatible with German law, and the ECB may not be able to do anything significant until then. (C ) Reuters