--Oil futures blow throw the $100-, $99- and $98-a-barrel levels

--Slide ignited by weak jobs data, but snowballed due to a host of factors

--Stabilizing supplies, weak demand and a poor economic outlook overwhelm Iran fears

(Adds details and data in the second, third, fifth, sixth, 18th and 20th paragraphs)

By Dan Strumpf and David Bird

Of Dow Jones NEWSWIRES

NEW YORK -(Dow Jones)- U.S. crude oil prices fell below $100 a barrel Friday for the first time since early February--and promptly tumbled past the $99 and $98 marks after a weak reading on U.S. employment.

Intraday crude prices fell to their lowest levels since Feb. 3--$97.51 a barrel for light, sweet crude oil for June delivery as futures lost more than $4. Futures have fallen 7.7% over the last three sessions.

But oil futures have been grinding down since hitting a recent settlement high of $109.77 on Feb. 26. Prices have been elevated for months over tensions with Iran over its nuclear program. But those prices have slowly succumbed to a steady drumbeat of stabilizing supplies, weak demand and an eroding global economy--with this most recent decline being particularly steep.

"I'd always felt that the only thing holding the prices up above $100 was the Iranian tensions," said John Kilduff, founding partner at Again Capital in New York.

The decline should help consumers at the pump. If oil prices stabilize below $100, the average U.S. price of regular conventional gasoline should peak at $3.75 a gallon this summer, down from the U.S. Energy Information Administration's expected monthly average peak of $4.01 a gallon, said Richard Hastings, macroeconomics analyst at Global Hunter Securities.

That would help boost gasoline sales for Valero Energy Corp.(VLO), Tesoro Corp. (TESO) and other refiners, who had been expecting lackluster demand during what should be their peak summer season. Refiners had been reporting April sales as flat or down slightly compared with the year before.

Anxiety over Iran and its nuclear program have pushed up prices for much of this year. Traders have been unwilling to let prices fall too low and get caught by price spike caused by military conflict or the sudden closure of the Strait of Hormuz, a major channels for the world's seaborne oil.

Meanwhile, the European Union is set to ban Iranian oil imports starting July 1, raising demand for oil from other sources and lifting prices.

Analysts have said prices carried a $10-to-$15 fear premium due to Iran.

But the anxieties have cooled a bit recently after Iran agreed to multilateral talks aimed at resolving the nuclear standoff.

At the same time, worries of a supply squeeze are easing as major oil producers boost oil production to ensure supply ahead of the embargo. Saudi Arabia, the world's largest oil exporter, has raised output to 10 million barrels a day in recent months. Also, the United Arab Emirates is about to put in operation a pipeline that will allow about 1.4 million barrels a day of its crude to bypass the Persian Gulf and the Strait of Hormuz.

Also, U.S. inventories of crude oil are at 375.9 million barrels, their highest level since 1990. The stockpiles have ballooned by 11% in the past 12 weeks since benchmark U.S. crude prices last traded below $100.

Meanwhile, the outlook for U.S. and global demand continues to be hampered by a spate of uninspiring economic news.

On Friday, the Labor Department said U.S. nonfarm payrolls rose just 115,000, less than the 168,000 rise seen by economists. Unemployment crept lower to 8.1%, but vastly more people exited the workforce than entered. Weak employment data typically correlates with weaker oil demand because it means fewer motorists traveling to work or taking vacations.

That's exactly what appears to be happening. The U.S. Energy Information Administration, which in February projected a slim rise in 2012 demand in the world's largest oil consumer, had scaled back its view by April and now sees U.S. oil use dropping slightly to a 15-year low.

In Europe, the news is even worse. Spain disclosed this week that it is officially in a recession. And a survey of economic activity in the euro-zone found a faster contraction than previously thought during April. The outlook for China, the world's No. 2 oil consumer, is mixed at best.

The widely watch HSBC China Manufacturing Purchasing Managers Index, a gauge of nationwide manufacturing activity, rose for April, but still indicates the sector is contracting.

Nymex crude futures recently traded off $4.35, or 4.2%, at $113.06. Meanwhile, Brent futures, the European benchmark were down $3.02, or 2.6%, at $113.06.

To be sure, Iran remains the oil market's wild card. When crude slips toward $100 a barrel, some investors "lose their stomach for shorting it further on the fear that all hell could break lose in the Middle East," said Bill O'Grady, chief market strategist for Confluence Investment Management in St. Louis.

Based on the evolving supply-demand picture, traders may now be willing to let prices test lower to levels, where some analysts say the U.S. benchmark crude is fairly valued.

"I thought for sure we'd end up in the low $90s with the flotilla of crude coming from Saudi Arabia," O'Grady said.

- Ben Lefebvre also contributed to this story.

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05-04-12 1450ET