Oil fell 4 per cent, sliding below $72 a barrel as disappointing US employment data and fresh fears about Europe's bank woes spreading made investors risk averse and worried about economic recovery.

US non-farm payrolls rose 431,000 in May, well short of the 513,000 analysts had expected, despite heavy government hiring for the census. Growth in private employment slowed sharply.

'We were expecting bigger growth in private employment and the figure looks relatively weak,' said Christophe Barret, oil analyst at Credit Agricole.

US crude for July fell $3.10, or 4.15 per cent, to settle at $71.51 a barrel, the lowest close since May 26. It dropped as low as $70.79 in post-settlement trading. ICE Brent fell $3.32 to settle at $72.09.

'Oil had some support earlier this week from the hope that positive signs from the US, especially improved demand, might offset the weakness in other economies, but the jobs report lowers demand expectations,' said Phil Flynn, analyst at PFGBest Research in Chicago.

Crude has been trading between the $64.24 intraday low on May 20, which was the weakest front-month price since July 2009, and the 2010 peak of $87.15 struck on May 3.

Both US and European stock markets fell sharply on Friday after the release of the jobs data and intraday the Dow Jones Industrials index fell below the key 10,000 level.

The euro fell on heightened concern Europe's debt crisis is expanding, with the equities slide adding pressure. Concerns about Hungary's public finances added to worries that the euro zone debt problems might be spreading.

Speaking on Friday ahead of talks in South Korea between the world's top 20 developed and emerging economies, policymakers expressed concerns about the global economy, adding to the uncertainty about energy demand.

US copper futures ended at a 7-1/2 month low as the jobs data fractured confidence already dented by worries over Chinese monetary tightening and the euro zone.

Adding to perceptions that its meteoric growth may be slowing, an official newspaper reported China's main ports imported 17.29 million tonnes, or 4.07 million barrels per day, of crude in May, up 12.8 per cent from a year earlier, but down 7 per cent from April.

The start of the Atlantic hurricane season this week was punctuated by the top US government weather agency warning it could be the most intense since 2005. This provided some support earlier this week to energy prices.

Hurricanes Katrina and Rita severely damaged and disrupted US oil production, refining and consumption when they crashed through the Gulf of Mexico region in 2005.

Adding to concern about storms was the oil spilled by BP's felled oil rig. BP began capturing some oil on Friday after installing a containment cap atop a ruptured Gulf of Mexico well and US President Barack Obama was set to make his third trip to the stricken area since the disaster. – Reuters