* Crude stocks rise, distillates fall - EIA
* Weak US economic data pressures equities, oil
* Funds tell CFTC not to blame for volatility
(Updates throughout, changes dateline from LONDON)
NEW YORK, Aug 5 (Reuters) - Oil fell on Wednesday as rising
U.S. crude inventories and weak economic data raised doubts
about a demand rebound in the world's top energy consumer.
U.S. crude inventories rose by 1.7 million barrels in the
week to July 31, according to the U.S. Energy Information
Administration, against forecasts for an 800,000-barrel build
as refinery cut back on utilization rates. []
"The big build on crude caught some people by surprise and
shows overall weakness in the economy and the unwinding of
economic optimism," said Phil Flynn, analyst at PFGBest
Research in Chicago.
Total U.S. product demand during the four weeks to July 31
fell by 3.1 percent against year-ago levels, while demand for
distillates -- including key industrial fuels such as diesel --
fell by 7.9 percent.
U.S. light, sweet crude <CLc1> traded down 23 cents to
$71.19 a barrel by 12:42 p.m. EDT (1642 GMT). London Brent
crude <LCOc1> rose 36 cents to $74.64 a barrel.
Early pressure on prices came from weak economic data, with
the Institute of Supply Management showing the U.S. service
sector, which accounts for about 80 percent of U.S. economic
activity, contracted in July at a faster pace than in June.
[]
The number of U.S. jobs lost in the private sector fell in
July but firms increased planned layoffs, according to the ADP
Employer Services report, suggesting the labor market remained
troubled even as the pace of losses slowed. []
Energy markets have been looking to broader economic data
for signs of an end to the recession and a potential rebound in
oil demand. Optimism has helped lift crude from below $33 a
barrel in December, well off record highs near $150 a barrel
reached in July 2008.
Further support has come from a series of output reductions
agreed by the Organization of the Petroleum Exporting Countries
(OPEC) last year.
OPEC member Kuwait on Wednesday said the producer group
would likely keep output targets unchanged when it next meets
in September if prices stay at current levels. []
The wide price swings in oil in recent years have spurred
calls for greater market regulation.
The U.S. Commodity Futures Trading Commission, which
oversees regulated futures exchanges, held its third and final
hearing on Wednesday into whether it should limit how many
futures contracts hedge funds, investment banks and other
speculators can control to help limit big movements in energy
prices. []
Funds that invest heavily in the sector argued that they
were not responsible for the wild volatility in energy prices,
while CFTC Chairman Gary Gensler reiterated the commission
should "seriously consider" setting position limits.
Investors were awaiting news from a meeting between trade
representatives and Britain's financial powers, the UK
Financial Services Authority (FSA) and the UK Treasury over
market transparency and efficiency.
(Reporting by Matthew Robinson, Robert Gibbons, and Gene Ramos
in New York; Joe Brock in London; Editing by Lisa Shumaker)
