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UPDATE 4-Oil drops 1 percent as IEA sees slow market rebalancing

* IEA sees strong demand but weakened OPEC compliance with cuts

Saudi doesn't rule out more output cuts -newspaper

* Market watching tensions between U.S., North Korea -analyst (Updates with IEA, price falling 1 percent)

By Dmitry Zhdannikov

LONDON, Aug 11 (Reuters) - Oil prices fell by one percent on Friday to their lowest in more than a week after the International Energy Agency said market rebalancing was taking time despite strong demand growth because of weak OPEC compliance with output cuts.

Brent crude, the global benchmark, was at $51.42 a barrel at 0830 GMT, down 48 cents. That was down 0.9 percent from its last close and its lowest since Aug. 1.

U.S. West Texas Intermediate (WTI) crude was down 48 cents, or 1 percent, at $48.11 per barrel, reaching its lowest since July 26.

Oil prices touched 2-1/2 month highs on Thursday, but retreated to close down by around 1.5 percent, with U.S. prices slipping back below $50 per barrel amid ongoing oversupply concerns.

"There would be more confidence that re-balancing is here to stay if some producers party to the output agreements were not, just as they are gaining the upper hand, showing signs of weakening their resolve," the IEA said in its monthly report.

The IEA said OPEC's compliance with the cuts in July had fallen to 75 percent, the lowest since the cuts began in January.

It cited weak compliance by Algeria, Iraq and the United Arab Emirates.

In addition, OPEC member Libya, which is currently exempt from the output cuts, steeply increased output.

"Crude oil prices failed to hold recent gains, with a nervous market starting to doubt recent falls in inventories," ANZ bank said in a note. "Supply-side issues also weighed on prices."

Saudi Arabian Energy Minister Khalid al-Falih said the kingdom did not rule out additional oil production cuts, the Saudi-owned Al Sharq Al Awsat newspaper reported on Friday.

Meanwhile, U.S. President Donald Trump stepped up his rhetoric against North Korea again on Thursday, saying his earlier threat to unleash "fire and fury" on Pyongyang if it launched an attack may not have been tough enough.

"I think the issue that is affecting the market is the general risk sentiment of saber-rattling between Washington and Pyongyang," said Michael McCarthy, chief market strategist at CMC Markets. (Reporting by Jane Chung and Dmitry Zhdannikov; editing by Jason Neely)