NEW YORK - Oil prices fell 2% on Friday as a report showing tepid US jobs growth in June reinforced concerns about a sluggish economy and demand for petroleum, and as expectations grew that Oslo will act to return Norway's striking oil workers to work.

The strike and subsequent lockout in Norway and continuing tensions over Iran's disputed nuclear programme allowed Brent crude prices to stay on pace to gain about 1% for the week, with US crude little changed from a week ago.

US employers added fewer jobs in June than expected by analysts, and the unemployment rate remained at 8,2%, fuelling fears Europe's debt crisis is shifting the US economy into a lower gear.

"People were looking for something better, some indicator that may show we're crawling out of this trough," said Nigel Gault, chief US economist at IHS Global Insight. "But everything here says we're still in it."

Brent August crude fell $2 to $98,70 a barrel by 2.47pm GMT, having earlier slipped to $98,05.

A close above $97,80 will allow Brent to post a gain for the week.

US August crude was down $2,60 at $84,62 a barrel, not far above an $84,26 intraday low and still within reach of last Friday's $84,96 close.

Monetary easing by central banks in China, the eurozone and Britain on Thursday had underscored concerns about a fragile global economy that has muddied the demand outlook for commodities.

"The latest jobs data also underscores the weakness that has emerged in the global economy," said Gene McGillian at Tradition Energy, Stamford, Connecticut. "With the economies of China and Europe also weakening, this spells lower global demand for energy."

The disappointing jobs report added support to hopes that the US Federal Reserve will move to bolster a sputtering economy.

Adding to the bearish tone, the head of the International Monetary Fund voiced concern over the deterioration of the global economy, saying the IMF will downgrade some of its forecasts.

Reuters