* Copper reverses gains after hitting one-week high
* Fall in oil prices, rise in dollar weigh on metal prices
* Factory output growth in China slows (Updates with New York prices, comment)
LONDON, Aug 14 (Reuters) - Copper reversed early gains on Thursday as the dollar strengthened, oil prices fell and as traders worried about global demand.
Three-month copperon the London Metal Exchange ended the day at $7,385 per tonne, down $15 from Wednesday and compared to $7,617 earlier in the day and its highest since August 8.
Copper for September deliverylost 4.70 cents to end at $3.3050 per lb by the end on the New York Mercantile Exchange's COMEX division. It advanced as far as $3.4340 a lb., a one-week peak, and support held with a higher low at $3.3045 per lb.
"Copper's tracking oil at the moment," said John Kemp, economist at RBS Sempra, adding that the metal reversed its gains as oil prices drifted lower.
Oil futures slid as the dollar strengthened amid concerns about euro zone economic weakness and rising U.S. inflation.
Crude prices fell towards $113 a barrel, after a $3 rise in the previous session, following a larger-than-expected drop in U.S. crude and gasoline inventories. [O/R]
The benchmark metal used in power and construction moved in erratic trade this week, hitting a six-month low of $7,150 a tonne on Tuesday as the commodity sell-off reached a peak.
But profit-taking since then on short positions -- bets on lower prices -- helped prices bounce from their multi-month lows
"A lot of commodity markets got themselves very short, but there's been a bit of a shift in sentiment, people are thinking prices had bottomed, at least in the short term."
Still, in the medium to longer term, markets are watching industrial activity in China, where data showed factory output growth slowed to 14.7 percent in July, a 19-month low, as manufacturers struggled with weakening export demand.
That compares with a consensus of 15.9 percent and a figure of 16 percent in June.
Industrial production data is a strong indicator of metals demand and one of China's biggest export market is the United States, where a housing market slump has hit copper demand.
"Chinese consumers haven't been in the market for a long time now. That's not going to change anytime soon," an LME trader said, adding that funds had been behind most of the activity in recent days.
Negatives for copper include stocks in LME warehouses, which are at six-month highs around 153,000 tonnes, a gain of about 40 percent since early May, and news that the euro zone economy contracted in the second quarter. [ID:nLE138387]
Another dampener is the falling backwardation or premium for cash materialover the three-month contract, which is at around $50 a tonne from around $240 a tonne in mid-July.
Three-month copper meanwhile is down about 16 percent since a record high of $8,940 a tonne hit on July 2.
"A cyclical downturn in demand will ease the situation," Standard Chartered said in a note.
"But long-term secular demand growth from industrialisation and rising incomes in Asia, and particularly China and India, are still dominant trends."
That is particularly true for China, which consumes about 25 percent of total global annual copper production estimated at more than 18 million tonnes. But Chinese consumers have been absent from the market for some months now.
"The Olympics mean activity has stalled in China," a London-based trader said.
But he added that the narrowing gap between copper prices in London and Shanghai could persuade Chinese consumers to return as activity in the fourth quarter picks up.
Aluminium closed at $2,776, down $37 from Wednesday. The metal used in packaging, transport and construction was boosted by the higher oil price, but the likelihood of an oversupplied market could mean lower prices are on the cards.
Tinjumped more than 5 percent to $18,850 a tonne on a short-covering rally and closed at $18,700 from $17,800, nickel at $19,000 from $19,500 and lead at $1,660 from $1,684 at the close on Wednesday.
Zincgained to $1,650 a tonne from Wednesday's last bid at $1,645. Metal Prices at 1617 GMT Metal Last Change Pct Move End 2007 Ytd Pct
move LME Cu 7365.00 -35.00 -0.47 6670.00 10.42 SHFE Cu* 58380.00 880.00 +1.53 56880.00 2.64 LME Alum 2777.00 -36.00 -1.28 2403.00 15.56 SHFE Alu* 18495.00 120.00 +0.65 18180.00 1.73 COMEX Cu** 334.60 -2.10 -0.62 303.05 10.41 LME Zinc 1630.00 12.00 +0.74 2370.00 -31.22 SHFE Zinc* 13895.00 85.00 +0.62 18950.00 -26.68 LME Nick 19100.00 -400.00 -2.05 26350.00 -27.51 LME Lead 1655.00 -29.00 -1.72 2550.00 -35.10 LME Tin 18500.00 700.00 +3.93 16400.00 12.80 ** 1st contract month for COMEX copper * 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Additional reporting by Humeyra Pamuk and Carole Vaporean in New York; Editing by Christian Wiessner)
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