* Markets to focus on U.S. economic data this week
* Focus on euro zone crisis ahead of Sarkozy, Merkel meeting
* U.S. crude stocks forecast to fall for a second straight week
* Coming up: U.S. Industrial output July ; 1315 GMT (Updates throughout)
By Zaida Espana
LONDON, Aug 16 (Reuters) - Brent crude futures fell on Tuesday, after rising nearly $2 a day earlier, as worries about global economic growth and a stronger dollar tempered appetite for risky assets.
The focus remained on the euro zone crisis ahead of a key meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel on the future of the embattled single currency area.
September Brent crude futures
"All eyes are on this European meeting today, so it's going to be rather choppy and volatile ahead of that," GFT Global market strategist David Morrison said. "(Oil is) reacting to the weakness in the euro, the strength in the dollar, and there is a general risk off mode: nothing fundamental, just traders taking money off the table."
Manufacturing in the New York area contracted for the third straight month in August, data showed on Monday, tempering any lingering hopes for a rebound in the second half of the year.
The survey is one of the earliest regional guideposts to U.S. factory conditions and analysts said it boded poorly for the larger national survey due at the beginning of September.
Worries about the faltering economic recovery also gained prominence after data from Europe's powerhouse Germany showed gross domestic product growth slowed more than expected in the second quarter.
"The overall feeling looking at the Germany data is that the outlook for global growth doesn't look particularly good, in which case the upside to oil is capped into the medium term," Morrison added.
Oil prices were also pushed lower by a stronger dollar, which makes commodities priced in the greenback more expensive for holders of other currencies.
The U.S. dollar strengthened, up 0.43 percent against a basket of currencies by 0832 GMT. The greenback had fallen to a near three-week low against the euro on Monday.
VTB Capital analyst Andrey Kryuchenkov said Brent prices continued to trade in parallel with the UK blue chip index performance.
"Brent's monthly rolling correlation to the FTSE 100 index remained at a more than one-year high, near 95%, with intraday direction still dictated mostly by the equity markets at the moment", he wrote in a note.
The market will be watching for a slew of U.S. economic reports that come out this week, including housing starts and industrial production data later on Tuesday, for clues on the health of the world's biggest economy.
Concerns over the U.S. recovery and the ongoing euro zone crisis have dragged down oil prices this month. Brent surged on Monday as hopes for a resolution to Europe's issues rose ahead of a Tuesday meeting between French and German politicians.
While the risk of a new U.S. recession has risen over the last couple of months, an outright contraction will most likely be avoided, Atlanta Federal Reserve Bank President Dennis Lockhart said on Monday. [ID:
The World Bank also called for national governments to seek long-term debt curbs on Tuesday to solve the current sovereign debt crises in Europe and the United States, but said it was too early for special action by the Group of 20 nations.
SUPPLY CONCERNS
The shutdown of a North Sea oil well at a Royal Dutch Shell
Plc
In the United States, crude oil stock piles are expected to have fallen for a second straight week due to lower imports, a preliminary Reuters poll showed on Monday ahead of weekly inventory data.
Supply disruptions caused by the ongoing fighting in Libya should continue to underpin prices, despite the worries on the macro-economic front.
Forces loyal to Muammar Gaddafi will destroy the oil terminal in Brega to prevent one of the country's most important economic lifelines falling into the hands of advancing rebels, the fighters said on Monday.
"We continue to believe that the return of Libyan crude supplies to the market will be seen in 2012 and as such any sell-off associated with headlines of a regime change in the country provide consumers with a good hedging opportunity," said analysts at J.P. Morgan in a report on Monday.
In Syria, where a five-month-long street uprising against President Bashar al-Assad's autocratic rule has so far had little impact on the country's 400,000 barrels per day oil production, the military broadened its assault over the weekend to try to put down the protests. (Additional reporting by Francis Kan in Singapore; editing by James Jukwey)