UPDATE 2-Oil falls towards $71, eyes on regulation meetings

                                
 * Oil lower after early gains
                                
 * Traders await EIA data for direction, trading cautious
                                
 * Buoyant equity markets supporting oil
                                
 * All eyes on oil industry meeting
                                
 By Sambit Mohanty
                                
 SINGAPORE, Aug 5 (Reuters) - Oil inched lower on Wednesday,
giving up earlier gains made on the back of a surprise drawdown
in U.S. crude inventories, pausing for breath after a rally
that helped the market to gain 13 percent since late last week.
                                
 U.S. crude, which lost 0.2 percent a day earlier, found
support earlier in the day after American Petroleum Institute
data showed crude stocks unexpectedly fell 1.5 million barrels
last week, adding to positive news from buoyant stock markets
and a dollar that hovered near 2009 lows.
                                
 The oil market will also be closely following a meeting
between trade representatives and Britain's financial powers,
the UK Financial Services Authority (FSA) and the UK Treasury,
which comes just ahead of a third Commodity Futures Trading
Commission (CFTC) hearing in Washington over how to rain in
speculation. [ID:nL5366815]
                                
 The UK meeting will discuss market transparency and
efficiency, according to the FSA invitation to oil market
participants, a copy of which has been seen by Reuters.
                                
 U.S. light, sweet crude <CLc1> fell 24 cents to $71.18 a
barrel by 0651 GMT, while ICE Brent crude <LCOc1> fell 2 cents
to $74.26 a barrel. The market is still trading at less than
half the record highs of over $147 it hit in July 2008.
                                
 "The market is reacting to the news from the API but I
think in the next few months there will be a downward bias for
oil. Supplies are quite adequate to meet demand," said David
Moore, commodity strategist at the Commonweath Bank of
Australia.
                                
 Trading should remain subdued while the market waits to see
if data from the U.S. Energy Information Administration, due to
be released later on Wednesday, is in line with the API
numbers.
                                
 A Reuters poll of analysts forecast an 800,000-barrel build
in crude stocks in the week to July 31. The poll also predicted
a 1.2-million barrel rise in distillate stocks and a
1.0-million barrel drop in gasoline stocks. [EIA/S]
                                
 Optimism that a potential turnaround in the global economy
could lift sagging oil demand has helped send crude up from
lows below $33 a barrel in December, with energy traders
keeping an eye on equities markets for signs of an economic
rebound.
                                
 "Equities is one of the key drivers for the oil market now
and I feel oil could break $75," said Daniel Liu, an energy
strategist at MF Global Singapore.
                                
 Japan's Nikkei average <.N225> was almost flat on
Wednesday, with investors taking a breather after the index set
a 10-month closing high the previous day. [.T]
                                
 Pending sales of previously owned U.S. homes rose at a
faster-than-expected pace in June, advancing for the fifth
month in a row, according to the National Association of
Realtors, a real estate trade group. [ID:nN0498623]
                                
 Energy traders also were watching an area of thunderstorms
in the Atlantic Ocean several hundred miles southwest of the
Cape Verde Islands associated with a tropical wave. The U.S.
National Hurricane Center said it had less than a 30 percent
chance of becoming a tropical storm. [ID:nN0475086]
 (Editing by Ben Tan)