My buddy has a 99 Ford Ranger XLT 4x4 that is leaking oil from rear passenger wheel. Any ideas on why?

The brake cover is not pushed all the way against the hub. There's a half inch gap between them. Don't know if that has anything to do with it.

Added (1). So it has nothing to do with the wheel bearing?

He MAY have a failed rear axle seal OR a broken rear axle. Either way, he should get the problem checked out As soon as possible, and get it fixed before the wheel and axle decide to depart the vehicle in traffic. (Most embarrassing)