UPDATE 2-Oil above $68 on US stockdraw; awaits EIA, econ data

                                
 * EIA weekly inventory data due later to set trading tone
                                
 * US August jobs and July factory orders data seen positive
                                
 * OPEC meet next week likely to keep supply targets steady
 (Updates with price milestone in paragraph 4)
                                
 By Jennifer Tan
                                
 SINGAPORE, Sept 2 (Reuters) - Oil edged above $68 a barrel
on Wednesday, reversing part of the previous day's slide of 3
percent, after industry data showed a sharp fall in U.S. crude
stocks, boosting hopes of a demand rebound in the world's top
energy user.
  The release of more closely watched U.S. Energy Information
Administration (EIA) data later in the day could confirm the
bullish report from the American Petroleum Institute (API), and
further underpin market sentiment.
                                
 More economic data due later -- August unemployment figures
and July factory orders, both which are expected to be positive
-- could underscore the U.S. economy's gradual pace of recovery
and offer more trading cues.
                                
 By 0600 GMT, U.S. crude for October delivery <CLc1> was up
54 cents at $68.59 a barrel, after touching a two-week low of
$68.01 in early trade, and falling nearly 3 percent to settle
Tuesday at $68.05. London Brent crude rose 53 cents to $68.26 a
barrel.
                                
 "Sentiment has become a little bit less bullish in recent
sessions, because the economic recovery has already been
factored into oil prices, and I think the market has risen a
little ahead of the fundamentals," said David Moore, commodity
strategist with the Commonwealth Bank of Australia.
                                
 Oil's decline came as economic concerns sent investors
scurrying into safer havens like the U.S. dollar, outweighing
positive U.S. manufacturing and home sales data on Tuesday.
                                
 Wall Street fell for a third straight day as renewed
worries about the balance sheets of U.S. banks spooked
investors. [.N]
                                
 Japan's Nikkei average <.N225> sank 2.5 percent on
Wednesday, with exporters hurt by a stronger yen and sentiment
dented by uncertainty over the U.S. financial sector's health.
                                
 But the release of API data showing that U.S. crude stocks
fell 3.2 million barrels in the week to Aug. 28, larger than
the forecast of a 600,000-barrel drawdown, helped oil recoup
some losses. The EIA will release its own inventory report at
1400 GMT. [EIA/S]
                                
 At 1215 GMT, Automatic Data Processing (ADP) will unveil
the U.S. employment report for August, while the Commerce
Department will release July factory orders. Both data are
expected to set the trading tone for the market.
                                
 Economists polled by Reuters expect 250,000 job losses in
August, down from 371,000 in July. Factory orders are expected
to rise 2.2 percent in July, versus a 0.4 percent gain in June.
                                
 On the supply front, the Organization of the Petroleum
Exporting Countries is likely to leave output targets unchanged
when it next meets meets on Sept. 9 in Vienna.
                                
 Adding to already high inventories, OPEC has reduced its
compliance with agreed production curbs, a Reuters survey on
Tuesday found.
                                
 OPEC supply in August rose for a fourth consecutive month
as Saudi Arabia, Nigeria and Venezuela increased their
production, taking overall output discipline to 68 percent of
the target from a revised 70 percent in July. [OPEC/O]
 (Editing by Ben Tan)