UPDATE 3-Oil slips below $71 ahead of expected stock build

                                
 * Oil falls more than $1 to below $71 a barrel
                                
 * Drop follows gains of almost 13 pct in just three days
                                
 * Analysts expect build in API crude stocks; data 2030 GMT
 
 (Updates detail, prices)
                                
 By Christopher Johnson
                                
 LONDON, Aug 4 (Reuters) - Oil fell more than $1 to below $71
per barrel on Tuesday, paring three days of gains, as
expectations of a rise in U.S. crude inventories offset optimism
from positive U.S. and Chinese manufacturing data.
                                
 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.
                                
 Dealers said Tuesday's fall looked more like a pause for
breath than a serious reversal of the market and suggested
further rises were likely.
                                
 "For the time being, it does not make much sense to go short
in energy...as the upside momentum is very strong," broker MF
Global said in its daily report.
                                
 "Crude oil markets have yet to reach severely overbought
levels," it said, adding, "Investors seem to be betting on a
V-shaped recovery."
                                
 U.S. light, sweet crude <CLc1> fell $1.08 to $70.50 a barrel
by 0900 GMT, after having fallen earlier by as much as $1.30.
ICE Brent crude <LCOc1> fell 70 cents to $72.85 a barrel.
                                
 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
                                
 But increasing signs of global economic recovery appeared 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 the
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 77.489, little changed from late U.S. trade on Monday
when the index fell as far as 77.451, its lowest since Sept. 29.
[USD/]
                                
 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]
                                
 Output by 11 members of OPEC rose slightly in July, lowering
its compliance rate to 71 percent of its agreed supply curbs
compared with 72 percent in June, a Reuters survey showed
[ID:nL350135].
 (Additional reporting by Sambit Mohanty in Singapore; editing
by Sue Thomas)