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UPDATE 4-Brent oil falls for 2nd day, Crimea rally gains wiped out

* Fears of war ease as Putin says force would be "last resort"

* Brent more than $3 below Monday's two-month high

* China sets 7.5 percent 2014 growth target, flat to last year

* Crude stocks at Cushing fell 2.6 mln barrels - API

* Coming up: EIA inventory data at 1530 GMT

(Rewrites throughout, updates prices, adds quote, previous dateline SINGAPORE)

LONDON, March 5 (Reuters) - Brent crude oil futures fell for the second straight session on Wednesday, dropping below $109 a barrel on an easing of fears that Russia's incursion into Ukraine could lead to war.

Brent is now more than $3 below a two-month high hit at the start of the week following Russia's seizure of Ukraine's autonomous Crimea region, with prices having retraced all the gains seen on Monday.

U.S. crude held steady, narrowing its discount to Brent to the lowest since October after an industry report showed the fifth consecutive weekly drawdown in inventories at the contract's delivery point in Cushing, Oklahoma.

"Given that we fell so hard after rallying so hard on Monday, the upside for Brent remains very limited," said Michael Hewson, an analyst at CMC Markets in London.

April Brent was down 32 cents at $108.98 a barrel at 0916 GMT, after ending $1.90 lower in the previous session. The contract hit $112.39 a barrel on Monday, its highest since Dec. 30.

U.S. crude for April delivery was down 6 cents at $103.27, after falling $1.59 on Tuesday. The U.S. contract hit its highest since Sept. 20 on Monday at $105.22. Its discount to Brent narrowed to as little as $5.59 on Wednesday, the smallest gap since October.

Russian President Vladimir Putin pulled back troops from the Ukraine border on Tuesday, saying he would use force only as a "last resort". Russia is the world's largest crude producer and supplies a third of Europe's gas.

Tensions remain elevated, however, with the Interfax news agency reporting Russian forces had seized two Ukrainian missile defence battalions in the Crimea region on Wednesday. The Ukrainian Defence Ministry was unable to comment immediately on the report.

CHINA TARGET

Brent could find support from news that China has said it expects to grow at the same pace in 2014 as last year, potentially boosting oil demand in a country set to overtake the United States as the largest crude importer.

The 2014 growth target is pegged at 7.5 percent, while China also aims to keep consumer inflation around 3.5 percent for the year, Premier Li Keqiang said.

The American Petroleum Institute's weekly report on U.S. oil stocks showed a 2.6-million-barrel drop at Cushing.

Stocks at Cushing have fallen more than 20 percent since the end of January, boosting U.S. crude prices as new pipeline projects help reduce a glut in the Midwest created by the U.S. shale oil production boom.

The Cushing drop overshadowed a 1.2-million-barrel increase in commercial crude oil inventories nationally, which was in line with analyst expectations.

More closely watched numbers from the government's Energy Information Administration (EIA) are due at 1530 GMT.

In Libya, top officials said production at the El Sharara oilfield may resume as they are working to address protesters' demands.

Production in Libya has fallen to a little over 200,000 barrels per day (bpd) from 1.4 million bpd in July, as protests hit oilfields and ports in the country.

(Additional reporting by Jacob Gronholt-Pedersen in Singapore; Editing by Dale Hudson)