U.S. private employers added a paltry 38,000 jobs in May, a report by ADP Employer Services said, below expectations and the lowest level since September 2010.
Another industry report showed the pace of U.S. manufacturing sector growth slowed more than expected to its lowest level in more than 1-1/2 years.
U.S. equities slumped, with major stock indexes posting their biggest daily decline since August.
"Today's sharp sell-off across the complex developed largely in response to additional negative economic data in the form of a disappointing ADP employment report and a bearish ISM manufacturing index figure," Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois, said in a note.
The data arrived ahead of the key U.S. May nonfarm payrolls report due on Friday and followed news that European manufacturing growth slipped sharply and China's factories expanded in May at their slowest pace in at least nine months.
Brent crude for July delivery fell $2.20 to settle at $114.53 a barrel, retreating from an earlier $117.28 peak.
U.S. July crude fell $2.41 to settle at $100.29 a barrel, having briefly dipped below $100 a barrel.
Trading volumes remained tepid, with totals for both Brent and U.S. crude below 30-day averages.
Both crude contracts extended losses in post-settlement trading late on Wednesday after the American Petroleum Institute (API) said U.S. crude stockpiles rose last week.
U.S. OIL INVENTORIES IN FOCUS
U.S. crude oil stockpiles jumped 3.5 million barrels last week, the API said, against expectations stocks would be lower. Gasoline stockpiles rose 1.5 million barrels, while distillate inventories fell 1.4 million barrels, the API report showed.
Ahead of the API report, a Reuters analyst poll yielded a forecast for U.S. crude oil stocks to be down 1.3 million barrels, with distillate stocks expected to be down only 300,000 barrels and gasoline stocks up 800,000 barrels.
The government's report from the U.S. Energy Information Administration will follow on Thursday morning.
Also before the API data, a MasterCard report showed U.S. retail gasoline demand fell last week versus a year earlier, though demand was up versus the previous week as drivers geared up ahead of the Memorial Day holiday weekend.
U.S. gasoline futures tumbled more than 2 percent, ending below benchmark distillate heating oil futures.
Moody's ratings agency downgraded Greece's credit rating, helping lift the dollar index .DXY, which measures the greenback against a basket of currencies.
The dollar's earlier weakness did not stem oil's tumble. A weak dollar usually is supportive to dollar-denominated oil.
Rising tensions in the Middle East supported oil early, before the economic data sent prices in retreat.
Explosions ripped through a northern area of Yemen's capital and a powerful tribal group backing the ouster of President Ali Abdullah Saleh battled security forces in the country that borders Saudi Arabia.
Pipeline disruptions helped oil rally $2 on Tuesday, but TransCanada Corp (TRP.TO) said it expects to restart its 591,000 barrel per day (bpd) Keystone pipeline running from Alberta, Canada, to the Cushing, Oklahoma, oil hub after the second spill in less than a month forced it to shut on Sunday.
(Additional reporting by Seng Li Peng in Singapore; editing by Sofina Mirza-Reid and David Gregorio)
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