UPDATE 5-Oil slips below $71 ahead of expected stock build

                                
 * Drop follows gains of almost 13 pct in three days
                                
 * Analysts expect build in API crude stocks; data 2030 GMT
                                
 
                                
 (Updates detail, prices)
                                
 By Christopher Johnson
                                
 LONDON, Aug 4 (Reuters) - Oil fell below $71 per barrel on
Tuesday, paring three days of gains as expectations for a rise
in U.S. crude inventories offset optimism over positive U.S. and
Chinese manufacturing data.
                                
 U.S. light, sweet crude <CLc1> fell 60 cents to $70.98 a
barrel by 1330 GMT, after having dipped earlier by as much as
$1.42. ICE Brent crude <LCOc1> fell 35 cents to $73.20 a barrel.
                                
 Analysts said Tuesday's price drop looked more like a pause
for breath than a serious market reversal but suggested that
weak fundamentals, with an abundance of supply in the United
States and not much demand seen to mop it up, could win out.
                                
 "As long as the optimism persists, I don't see much downside
potential, but I definitely see downside potential going forward
say two or three months," said Eugen Weinberg of Commerzbank.
                                
 Cautious statements from UBS <UBSN.VX> <UBS.N>, which posted
another big quarterly loss of 1.4 billion Swiss francs ($1.31
billion) on Tuesday, dampened some investors' risk appetite,
analysts said. [ID:nL3704235]
                                
 Norwegian oil and gas producer StatoilHydro <STL.OL> also
posted worse than expected second-quarter results. [nL4220093]
                                
 
                                
 DATA
                                
 An increase in the visible signs of global economic recovery
appears to be limiting the downside for the oil market as
investors' appetite for risk rises.
                                
 Global stock markets hit a nine-month high on Monday and
Asian stocks climbed to an 11-month high on Tuesday. [MKTS/GLOB]
                                
 Monday's gains took oil prices, still less than half the
record high of over $147 hit in July 2008, within sight of this
year's high of $73.38 set in June.
                                
 "Oil will struggle to break $75 but there might be a support
for the market at current levels because of the strong PMIs,"
Victor Say at Informa Global Markets said.
                                
 The U.S. manufacturing sector continued to shrink in July,
but at a slower pace than in June and more slowly than expected,
according to Institute for Supply Management data, while Chinese
PMI data showed a fourth straight month of growth.
[ID:nN03512275]
                                
 The dollar index <.DXY> against six other major currencies
was around 77.640, little changed from late U.S. trade on Monday
when the index fell as far as 77.451, its lowest since Sept. 29.
[USD/]
                                
 A weak dollar can lend support to dollar-denominated
commodities such as oil.
                                
 Analysts said the dollar's fall on Monday to its lowest
level this year helped push up U.S. crude oil futures by 3
percent on top of a rally of almost 10 percent last week.
                                
 The market is looking to take a cue from weekly U.S. crude
inventory data due later from the American Petroleum Institute
and on Wednesday from the Energy Information Administration.
                                
 According to a preliminary Reuters poll, analysts expected a
1 million barrel rise in crude stocks last week, a 1.1 million
barrel rise in distillate stocks and a 1.6 million barrel draw
in gasoline stocks. [EIA/S]
 (Editing by James Jukwey)