* China's factory sector contracts further in August
* U.S. jobs data, ECB meeting outcome keenly awaited
* Investors hope for economic stimulus, monetary easing
* Norwegian oil workers' strike averted by pay deal
(Updates prices, graphics; paragraph 5)
LONDON, Sept 3 (Reuters) - Oil steadied on Monday, despite
Chinese data showing a deepening slowdown in the world's biggest
energy consumer, as investors focused on the possibility of more
stimulus measures and other moves to try to revive economic
growth.
China's factories have been hit by slowing orders, two major
surveys showed on Monday, suggesting the slowdown in the world's
No. 2 oil user could be worsening.
The figures prompted a new round of speculation that
governments would act sooner rather than later to increase money
market liquidity to encourage bank lending, a move that would
almost certainly boost commodities and oil.
Trading volumes were limited, with U.S. financial markets
closed for the Labor Day holiday.
Brent October futures were up 2 cents at $114.59 per
barrel by 1340 GMT after jumping nearly $2 on Friday. U.S. crude
futures eased 10 cents to $96.37.
Both contracts rose more than 9 percent in August, driven by
supply concerns and hopes for stimulus from the Federal Reserve.
"The Chinese data is very gloomy and suggests that the world
economy is slowing," said Carsten Fritsch, an oil analyst at
Commerzbank in Frankfurt.
"But the market impact is rather limited as it raises hopes
of more economic stimulus measures," he said. "Hopeful of
central bank measures, speculative financial investors are
increasingly betting on rising prices."
China's official factory purchasing managers' index (PMI),
one of the early indicators of the state of the economy, fell to
a lower-than-expected 49.2 in August, the National Bureau of
Statistics said on Saturday.
It was the first time since November 2011 that the number
has fallen below 50, which separates expansion from contraction,
and followed last week's flash PMI for August, which hit a
nine-month low. Together, the two manufacturing surveys could
strengthen the case for further policy steps to bolster growth.
DATA
U.S. and European data this week could throw light on
central bank plans for monetary policy.
Traders are eyeing the European Central Bank's meeting on
Thursday and U.S. non-farm payrolls data due on Friday.
Although the minutes of the last meeting of Fed policymakers
suggested the central bank was leaning towards further stimulus
to boost the economy, a keenly awaited speech on Aug. 31 by
Chairman Ben Bernanke offered no specifics.
Hopes for easing remained intact as Bernanke said stagnation
in the U.S. labour market was a "grave concern", leading
investors to expect that unemployment data due on Friday may
provide the Fed with a trigger.
U.S. quantitative easing tends to be positive for
commodities as it drives down the dollar and adds liquidity.
An ECB meeting on Thursday will be monitored closely as the
magnitude of the euro zone's problem gives it the ability to
derail markets across the globe.
Expectations are high after ECB Chairman Mario Draghi in
July pledged to do whatever was necessary to preserve the euro,
sparking hopes the central bank may announce details of a
bond-buying plan this week.
Investors were also monitoring a debate about the release of
strategic oil reserves to cool prices, a plan mooted by the
United States and supported by Britain and France, but opposed
by Germany and Italy.
In Norway, a last-minute wage deal between oil drill workers
and their employers helped keep prices subdued by averting what
would have been the second strike in two months.
In July, a 16-day strike by Norway's oil production workers
shut 13 percent of production before the government stepped in.
Tension persisted between Israel and Iran in the Middle
East, a critical source of crude supplies.
Israeli Prime Minister Benjamin Netanyahu on Sunday urged
world powers to set a "clear red line" for Tehran's atomic
programme that would convince Iran they were determined to
prevent it from obtaining nuclear arms.
His remarks suggested a growing impatience with Israel's
main ally, the United States, and other countries that have been
pressing him to give diplomacy and sanctions more time to work
and hold off on any go-it-alone strike on Iran.
(Additional reporting by Ramya Venugopal in Singapore; editing
by Keiron Henderson)