Oil steady near $74 on U.S. manufacturing, eyes employment

                                
   * Oil takes wait-and-see stance ahead of U.S. jobs data
                                
 * Premium of 2nd month US crude vs front stays wide
                                
 * Coming Up: U.S. weekly initial jobless claims; 1230 GMT
                                
 By Alejandro Barbajosa
                                
 SINGAPORE, Sept 2 (Reuters) - Oil on Thursday held onto
most of its previous session gains of 2.8 percent after
manufacturing in top consumers the United States and China
picked up in August, raising hopes record petroleum stockpiles
will fall and reviving confidence across markets.
                                
 U.S. crude for October delivery <CLc1> slipped 3 cents to
$73.88 a barrel by 0228 GMT, after a jump of $1.99 on
Wednesday. ICE Brent <LCOc1> dipped 15 cents to $76.20.
                                
 The focus over the next two days was set to turn to lagging
U.S. employment indicators, including weekly jobless claims on
Thursday. The nation's nonfarm payrolls probably fell for a
third straight month in August, a Reuters survey showed, ahead
of a monthly report due on Friday. [ID:nN31235915]
                                
 "The market was just seeking for optimism and this came
from strong manufacturing data," said Serene Lim, a
Singapore-based oil analyst at ANZ.
                                
 "Some traders started the new month with new positions. It
was a buying opportunity, especially for those who were bullish
in the long term. However, the market will be in a wait-and-see
mode especially before the payrolls report this Friday."
                                
 U.S. private employers unexpectedly cut 10,000 jobs in
August, a report by payrolls processor ADP showed on Wednesday.
                                
 But markets shrugged off the negative news from the labor
market, after the Institute for Supply Management on Wednesday
showed U.S. factory activity rose in August for a 13th straight
month.
                                
 Investors had been expecting the ISM reading to show a
decline in manufacturing from July, which would have fit with
recent data showing a slowdown in U.S. growth.
                                
 Wednesday's rally in oil prices was earlier triggered by
data showing China's manufacturing industry accelerated in
August, expanding for an 18th consecutive month.
                                
 Japan's Nikkei average rose 1.6 percent on Thursday, moving
further away from a 16-month low touched the previous day,
after the U.S. and Chinese manufacturing data eased investor
worries about the global economy. [.T]
                                
 Global stocks posted their biggest percentage gain this
summer on Wednesday, in tandem with a broad-based commodities
rally. [MKTS/GLOB]
                                
 STOCKPILES REACH NEW RECORD
                                
 But oil market fundamentals were not as constructive. U.S.
crude stockpiles rose three times as much as expected in the
week to Aug. 27, adding 3.4 million barrels, as refineries cut
usage rates, the Energy Information Administration said on
Wednesday.
                                
 Distillate supplies fell 739,000 barrels, going against
forecasts for an increase and snapping 13 straight weeks of
gains, while gasoline inventories declined 212,000 barrels,
roughly in line with analyst forecasts, the EIA data showed.
                                
 EIA statistics showed total U.S. petroleum stockpiles rose
last week to a new high of 1.143 billion barrels, up from 1.139
billion the previous week, for the highest inventory levels
since at least 1990, when the EIA began tallying weekly stocks
data.
                                
 "The fundamentals will still weigh down the market," Lim
said. "Cushing inventories are still relatively high."
                                
 The large build in U.S. total crude stockpiles could deepen
the contango in crude markets, when front month futures trade
at a discount to later months. (http://link.reuters.com/qet58n)
                                
  The spread between first- and second-month crude oil
contracts ended at $1.50, narrowing from $1.60 on Tuesday,
which was the widest level since early June. U.S. crude was
also trading close to the biggest discount to Brent crude since
May.
                                
 Tropical Depression Nine in the eastern Atlantic Ocean
strengthened into Tropical Storm Gaston late on Wednesday as it
continued on a westerly path that could head for the Caribbean.
                                
 Gaston, the seventh named storm of the 2010 Atlantic
hurricane season, was expected to gain force slowly over the
next 48 hours and could become a hurricane by Sunday or Monday.
[ID:nN01132042]
                                
 Some early computer models showed Gaston tracking in a
westerly direction into the Caribbean, but it was too early to
tell whether it would enter the oil-rich Gulf of Mexico.
                                
 Hurricane Earl in the western Atlantic was upgraded to a
Category Four hurricane again, and was expected to sideswipe
the U.S. East Coast from the northern Carolinas, making
landfall on Canada's Atlantic coast on Saturday.
 (Editing by Clarence Fernandez)