UPDATE 7-Oil retreats from $70 highs but set for fourth week of gains

* High prices risk encouraging shale production growth -IEA

Brent, WTI hit highest since Dec 2014 on Thursday

* China's weak December oil data weighs (Adds Gulf OPEC production, updates prices)

By Ahmad Ghaddar

LONDON, Jan 12 (Reuters) - Oil prices eased on Friday after hitting a three-year high of more than $70 a barrel the previous day, but they remained on track to post a fourth straight week of gains.

Brent crude futures traded 6 cents lower at $69.20 a barrel at 1449 GMT. The contract broke above $70 on Thursday for the first time since December 2014.

U.S. West Texas Intermediate (WTI) crude futures were at $63.66, down 14 cents. WTI the day before rose to its strongest since late 2014 at $64.77.

"It is remarkable to see that most market analysts believe that prices have rallied too far since consensus forecasts are significantly lower than the current spot prices," Hans van Cleef, senior energy economist at ABN Amro, said in a note.

"On the other hand, most investors are still positioned to benefit from further price gains," he said.

Analysts and traders have warned about the risk of a price correction since the start of 2018, but they say overall market conditions remain strong, mainly due to output cuts led by the Organization of the Petroleum Exporting Countries and Russia.

Fatih Birol, head of the Paris-based International Energy Agency, said on Friday that oil prices at $65 to $70 risked encouraging more oversupply from U.S. shale drillers.

Gulf OPEC producers plan to keep their oil output in the current quarter below the year-earlier level despite strong demand growth and a drop in global inventories, a senior OPEC source familiar with Gulf oil thinking said.

In addition to the OPEC and non-OPEC production cuts of 1.8 million barrels per day (bpd) that are due to last until the end of 2018, oil prices have found support from eight consecutive weeks of U.S. crude inventory drops.

U.S. commercial crude stocks <C-STK-T-EIA> fell by almost 5 million barrels in the week to Jan. 5, to 419.5 million barrels. That was slightly below the five-year average of just over 420 million barrels, the target for OPEC and others cutting output.

Relatively weak Chinese December oil data weighed on prices, traders and analysts said. China's crude imports in December fell 9 percent month-on-month to 33.7 million tonnes, or 7.97 million bpd, customs data showed.

This has contributed to a fall in Singapore refinery profit margins <DUB-SIN-REF> to below $6 per barrel this month, their lowest seasonal level in five years, leading some refiners to scale down crude runs.

(Additional reporting by Henning Gloystein in Singapore; Editing by Dale Hudson and Edmund Blair)