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UPDATE 6-Oil prices rise over 4% on positive economic data from China

Scott DiSavino

* Survey finds expansion of China's services sector

* U.S. manufacturing contracted in August - data

* Trump warns he will be tougher on Beijing if trade talks drag

* Iran set to release crew of detained tanker

* Coming up: U.S. weekly oil inventory data from API (2030 GMT) (Adds latest prices; changes dateline, previous LONDON)

NEW YORK, Sept 4 (Reuters) - Oil prices rose more than 4% on Wednesday, boosted by a wider market pickup on positive news from China, after three days of losses due to fears about a weakening global economy.

Brent futures were up $2.53, or 4.3%, at $60.79 a barrel by 12:32 p.m. EDT (1632 GMT), while U.S. West Texas Intermediate (WTI) crude rose $2.42, or 4.5%, to $56.36.

That put WTI on track for its biggest daily percentage increase since July 10.

Stock indexes worldwide rebounded as easing geopolitical concerns and upbeat economic data from China brought buyers back to the equities market.

A private survey showed that activity in China's services sector expanded at the fastest pace in three months in August as new orders rose, prompting the biggest increase in hiring in more than a year.

In addition, investor risk appetite was further revived after Hong Kong withdrew the contentious extradition bill at the heart of recent protests.

China is the world's second-largest oil consumer and largest importer.

In the United States, crude stockpiles were expected to have declined for a third straight week, a Reuters poll showed, ahead of weekly data from the American Petroleum Institute (API) on Wednesday, and the government on Thursday. Both reports are delayed a day due to the U.S. Labor Day holiday.

Some analysts, however, noted overall fundamentals of the oil market remained discouraging.

"Oil prices however remain focused on the trade war and the longer we dont see a date scheduled for a face-to-face meeting between Chinese and U.S. officials, the greater the odds we could see a retest of the summer lows," Edward Moya, senior market analyst at OANDA in New York, said in a report.

U.S. President Donald Trump warned on Tuesday he would be "tougher" on Beijing in a second term if trade talks dragged on, compounding market fears that trade disputes between the two countries could trigger a U.S. recession.

U.S. data released on Tuesday showed manufacturing activity contracted in August for the first time in three years, while euro zone activity shrank for a seventh month.

"Crude oil remains troubled by reports that production from OPEC, Russia and the U.S. all rose last month. This (comes) at a time when the strength of demand growth, due to trade war pessimism, has increasingly been called into question," Saxo Bank commodity strategist Ole Hansen said.

BP Plc's Chief Financial Officer Brian Gilvary told Reuters that global oil demand is expected to grow by less than 1 million barrels per day (bpd) in 2019 as consumption slows.

But supply looks set to stay constrained as Russian officials and sources from the Organization of the Petroleum Exporting Countries indicated the countries would remain committed to their agreement to rein in production despite a shake-up in Saudi Arabia's oil industry.

In a possible sign of tension easing in the energy-rich Gulf, Iranian state television reported on Wednesday that Tehran would free seven crew members of the detained British-flagged tanker Stena Impero.

The vessel was seized two weeks after Britain detained an Iranian tanker off the territory of Gibraltar which was released in August. (Additional reporting by Noah Browning in London and Florence Tan in Singapore; Editing by Marguerita Choy and Dale Hudson)