UPDATE 6-Oil slides as Trump impeachment prospect, Saudi supply weighs

Laila Kearney

* House releases whistleblower report on Trump-Ukraine dealings

* Saudi move to restore production adds to supply

* Trump says trade deal with China could come soon

* U.S. and Japan sign limited trade deal (New throughout, updates prices, market activity and comments, new byline, changes dateline, previous LONDON)

NEW YORK, Sept 26 (Reuters) - Oil fell on Thursday as new developments in an inquiry into the impeachment of U.S. President Donald Trump weighed on demand sentiment while moves to quickly restore Saudi output after attacks on its oil installations promised more oil supply.

The U.S. House Intelligence Committee released a declassified version of a whistleblower report alleging Trump used his office to solicit interference in the 2020 presidential election from a foreign country.

"When the odds of impeachment go down, the market goes up. When the odds of impeachment goes up, it goes down," said Phil Flynn, an analyst with Price Futures Group in Chicago. "The market doesn't like the prospect of impeachment - that's going to be a negative for the U.S. economy, it's going to be a negative on U.S.-China trade."

Both benchmarks fell for a third straight day, with Brent crude futures down 39 cents, or 0.6%, at $62.00 a barrel

and U.S. West Texas Intermediate (WTI) crude 65 cents, or 1.2%, lower at $55.84 a barrel by 11:47 a.m. EDT (1547 GMT).

Prices have been weighed down by the faster-than-expected recovery of Saudi output after the drone and missile strikes on two of its oil-processing plants, as well as a surprise 2.4-million-barrel build in U.S. crude inventories last week.

Saudi Arabia, the world's top oil exporter, has restored its production capacity to 11.3 million barrels per day, sources briefed on state oil company Saudi Aramco's operations told Reuters.

Comments by Trump on Wednesday, which signalled that a resolution to the U.S. trade dispute with China might be near, helped limit losses.

A day after delivering a stinging rebuke to China over its trade policies, Trump said Beijing wanted to make a deal and it "could happen sooner than you think."

Trump and Japanese Prime Minister Shinzo Abe also signed a limited trade deal that would open Japanese markets to $7 billion of U.S. products annually.

"The oil market has seemingly returned to business as usual," said Norbert Ruecker, head of economics and next-generation research at Julius Baer.

"Instead of the attack-related fallout including disruption and geopolitical risks, the soft economy and stagnant oil demand are back in focus."

Crude futures were pressured by sluggish economic data in leading European economies and Japan.

"There's not too much to be cheery about on oil markets today," said Jeffrey Halley, senior market analyst for Asia Pacific at OANDA. (Additional reporting by Noah Browning in London and Roslan Khasawneh in Singapore; Editing by Marguerita Choy and Mark POtter)