UPDATE 3-Oil falls below $118, economy weighs
* Weak U.S., Europe jobs and factory data prompt caution
* U.S. crude stocks at highest since September 1990
* Coming Up: ECB rate decision; 1145 GMT; expect unchanged
* Coming Up: US jobless data 1230 GMT (Changes dateline, updates throughout)
By Jessica Donati
LONDON, May 3 (Reuters) - Oil prices fell again on Thursday, slipping below $118 a barrel after steep losses a day earlier were triggered by a round of poor employment and manufacturing data either side of the Atlantic, reviving fears about the global economy.
A build in U.S. crude oil stocks also contributed to a slide in prices the previous day, after inventories were reported at the highest level since September 1990.
"Everything is dependent on macroeconomic issues. Personally I am, one way or another, even with the fundamental difficulty in identifying all the geopolitical issues like Iran," said Tony Machacek, an oil futures broker at Jefferies Bache.
"If these remain on the side, I think prices could easily be heading lower."
Brent crude was down 55 cents to $117.65 a barrel at 0916 GMT, after falling more than 1 percent in the prior session. The contract is well below the year's high of $128.40 reached on March 1.
U.S. oil was down 50 cents at $104.72 a barrel, after dropping nearly 1 percent on Wednesday. A steeper fall in Brent narrowed its premium versus U.S. oil CL-LCO1=R to as low as $12.65 on Thursday, the smallest since Feb. 1.
"The market is waiting for jobless claims later today for momentum one way or another," Machacek continued.
U.S. weekly jobless claims data was due at 1230 GMT on Thursday, followed by U.S. employment data for April at 1230 GMT on Friday.
Analysts have forecast a slight rise in hiring has been forecast, leaving unemployment at a three year low.
Oil slid the most in two weeks on Wednesday after data showed U.S. private firm hiring in April was at the slowest since September, while unemployment in the euro zone was at a 15 year record high.
On the manufacturing front, new orders for U.S. factory goods suffered the steepest drop in three years, while in the euro zone's manufacturing sector index was at its lowest since June 2009.
Adding to the gloomy outlook for the world economy, China's services sector data showed that growth slowed last month, with the non-Manufacturing Purchasing Managers' Index (PMI) retreating from March's ten-month high.
Also helping to chip away at oil prices, worries about an escalating conflict between the West and Iran over its nuclear programme are beginning to subside as the parties involved have been engaged in productive talks.
Iran on Wednesday said it would seek an end to sanctions over its nuclear activities at talks with big powers later this month.
However, Iran also accused France of helping Israel develop inhumane weapons and hardened a public line that an end to sanctions is vital to the success of the talks. It was the first time an influential political figure explicitly said he expects progress on the issue.
"Iran is still a factor. There is risk premium built into forward pricing. At the end of the day, people can never really become comfortable about these things until they see concrete actions," said Ric Spooner, chief market analyst at CMC Markets.
Iranian oil exports are running at between 200,000 and 300,000 barrels per day below last year's level, the head of the International Energy Agency said on Thursday.
Iranian officials have said the country exported an average of 2.2 million barrels a day last year. (Additional reporting by Manolo Serapio Jr.; editing by Himani Sarkar and Keiron Henderson)
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