UPDATE 1-Brent holds above $118, caution ahead of US data

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* U.S. crude stocks at highest since September 1990

* Coming Up: ECB rate decision; 1145 GMT (Updates prices, adds Brent/WTI spread)

By Manolo Serapio Jr

SINGAPORE, May 3 (Reuters) - Brent crude steadied above $118 a barrel on Thursday, reflecting caution among investors ahead of a key U.S. employment report after dismal data from the United States and Europe renewed doubts about the state of the global economy.

Oil slid the most in two weeks on Wednesday as investors sold off commodities and equities after data showed hiring by U.S. private firms in April was the slowest since September, new orders for U.S. factory goods suffered the steepest drop in three years and the euro zone's manufacturing sector index marked its lowest reading since June 2009.

"Risk markets are overall very cautious ahead of this nonfarm payroll data, that's why we're seeing reduced volumes and a few bets being taken off the table," said Ben Le Brun, market analyst at OptionsXpress in Sydney.

Asian shares and other commodities like copper also slipped on the disappointing economic data from both sides of the Atlantic.

Brent crude for June delivery edged up 11 cents to $118.31 per barrel by 0609 GMT, after falling more than 1 percent in the prior session.

U.S.

"crude stocks at highest since September 1990* Coming Up: ECB rate decision; 1145 GMT (Updates prices, adds Brent/WTI spread)By Manolo Serapio JrSINGAPORE, May 3 (Reuters) - Brent crude steadied above $118 a barrel on Thursday, reflecting caution among investors ahead of a key U.S"oil eased 11 cents to $105.11 after dropping nearly 1 percent on Wednesday.

Brent and U.S. crude's percentage losses in the previous session were the biggest since mid-April, but the harder fall in Brent narrowed its premium versus U.S. oil CL-LCO1=R to as low as $12.65, the smallest since Feb. 1.

U.S. businesses outside the farm sector are expected to have added 170,000 jobs last month, according to a Reuters survey, after rising a meager 120,000 in March.

Disappointment over the March number, which was less than half the average monthly increase in the prior three months, pointed to sputtering growth in the world's top economy, fuelling a sell-off in riskier assets last month.

"If the figure is significantly weaker on Friday then it starts to raise concerns about some moderation in what, at this stage, is still only a fairly modest rate of employment growth in the U.S.," said Ric Spooner, chief market analyst at CMC Markets.

"It would not be taken well by risk markets."

BIG CONCERN

Recent U.S.

data, including softer labour market figures, have raised fears that the economy may have lost some strength as the second quarter got underway, denting the outlook for demand from the world's No. 1 oil consumer.

Underscoring slow demand, U.S. crude inventories soared to their highest level in more than 20 years last week, rising for a sixth straight week.

U.S. crude oil stocks rose 2.84 million barrels last week to 375.86 million barrels, more than forecast, and hitting the highest level since September 1990.

Domestic crude stocks have ballooned more than 29 million barrels since late March, the biggest six-week increase since February 2009, data from the U.S. Energy Information Administration showed.

But OptionsXpress' Le Brun said the continued build in U.S.

"employment report after dismal data from the United States and Europe renewed doubts about the state of the global economy.Oil slid the most in two weeks on Wednesday as investors sold off commodities and equities after data showed hiring by U.S"crude stockpiles was a short-term concern for investors who are far more keen on what's happening in the global economy.

"We've already felt the fallout from (the stock build). But the economic data that we're seeing across the board is patchy and it's a big concern," he said.

And while the geopolitical risks that have helped lift Brent crude as high as $128.40 this year have somewhat eased after key producer Iran agreed to return to the negotiating table with six world powers over its disputed nuclear program, fears over Iran-linked supply disruptions are still there, analysts say.

Iran on Wednesday said it would seek an end to sanctions over its nuclear activities at talks with big powers later this month and sought to turn the tables on its Western foes by accusing France of helping Israel develop "inhumane nuclear weapons".

"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," Spooner of CMC Markets said. (Reporting by Manolo Serapio Jr.; Editing by Himani Sarkar)

Energy.