UPDATE 3-Oil prices slip despite expected OPEC extension of output cuts

* OPEC expected to extend production cuts beyond March 2018

* U.S. crude stocks up by 3.1 mln barrels to 468.5 mln - API

* Goldman Sachs says stock draws have peaked this year

* Goldman expects average Brent price of $58 per barrel in 2018 (Updates throughout)

LONDON, Oct 12 (Reuters) - Oil prices slipped on Thursday as U.S. fuel inventories rose and despite efforts by OPEC to cut production.

Brent crude oil was down 20 cents at $56.74 a barrel by 0730 GMT. U.S. light crude was 25 cents lower at $51.05. Both benchmarks have risen more than 20 percent from their lows in June as world oil markets have tightened.

The Organization of the Petroleum Exporting Countries and other producers including Russia agreed last year to reduce output by 1.8 million barrels per day (bpd) to prop up prices and the cuts, from January, have helped drain inventories.

The OPEC-led deal helped lift oil from the $30 to $40 per barrel range in late 2016/early 2017. But traders say supplies remain ample despite these cuts, thanks in large part to surging U.S. production <C-OUT-T-EIA>.

As a result, OPEC is widely expected to extend the cuts beyond the current expiry date of end-March 2018.

"OPEC doesn't really have a choice but to extend cuts unless they're happy to risk sub-$40 per barrel prices again," said David Maher, Managing Director for energy at commodity merchant RCMA Group in Singapore.

With OPEC-led supply cuts supporting prices, but rising U.S. production capping crude, many analysts see markets balanced in 2018 and 2019, with Brent in a $50-$60 range.

"Currently, the main risks to upside are new Iran sanctions and Venezuela issues, while downside risks are OPEC cuts not being extended or poor compliance leading to agreement breaking down, or weaker demand," Maher said.

U.S. President Donald Trump is threatening to impose sanctions on Iran less than two years after they were lifted under a 2015 deal between Tehran and leading world powers following Iran's agreement to suspend its disputed nuclear programme.

In Venezuela, an OPEC-member with huge oil reserves, an economic and political crisis is threatening production.

With rising U.S. production undermining OPEC's efforts to tighten the market, inventories remain high.

U.S. crude stocks rose by 3.1 million barrels to 468.5 million barrels last week, according to industry group the American Petroleum Institute (API).

Official U.S. fuel inventory data is due to be published on Thursday by the Energy Information Administration (EIA).

"Our updated global supply-demand balance indeed shows peak stock draws in 3Q17," Goldman Sachs said in a note to clients.

The U.S. bank said oil supply and demand fundamentals meant it expected Brent to average $58 a barrel in 2018.

(Addititional reporting by Henning Gloystein in Singapore; Editing by Greg Mahlich)