* FTSE 100 ends a touch higher, helped by crude
* Commodities offset weak banks; HSBC trades ex-div
By Dominic Lau
LONDON, Aug 19 (Reuters) - Britain's leading share index ended slightly higher on Wednesday, helped by oil producers, which gained on firmer crude prices as U.S. demand recovered, but banks fell after HSBC traded ex-dividend. The FTSE 100 closed up 3.89 points, or 0.1 percent, at 4,689.67, after trading as low as 4,625.44 earlier in the day, hurt by a sharp drop in Chinese stocks.
Volumes on the UK benchmark were about 67 percent of its 90-day daily average volume.
"Everyone is asking the same question, when the market will run out of steam. It is when the actual buying stops, not when the sellers are coming, because there is so much money on the sidelines. Any corrections that we have seen, people are getting in," said Jawaid Asfar, a trader at Securequity.
"A lot of the people have missed this rally," he said. "Until we see the buying exhausted, we are not going to see a proper correction."
The Shanghai Composite Index dropped 4.3 percent on Wednesday, taking the losses on the key index to 20 percent in the past two weeks.
Oil majors were in demand on the UK index, with BP, Royal Dutch Shell and BG Group up 0.5 to 1.3 percent.
Crude prices reversed early losses to trade above $71 a barrel, as data showing demand is recovering in the United States outweighed doubts about the strength of the global economy.
Eurasian Natural Resources led the mining sector higher, up 6.2 percent to top the FTSE 100 gainers' list after the miner's results beat expectations.
Fresnillo, BHP Billiton, Rio Tinto and Xstrata put on 1.3 to 5.8 percent.
Among other blue-chip gainers, Serco rose 2.4 percent after Evolution Securities initiated coverage of the outsourcing group with a "buy" rating and a 500 pence target.
The UK index has rallied 35 percent since hitting a low in March, and is up 5.8 percent for the year.
HSBC WEIGHS
Banks shaved off the most points, with HSBC, Royal Bank of Scotland, Barclays and Standard Chartered down between 0.5 and 2 percent. HSBC also traded ex-dividend.
However, Lloyds Banking Group added 2 percent after the bank said it was reviewing a decision to close all branches of its Cheltenham & Gloucester unit as part of a shake-up in its mortgage and loans operations.
Lloyds shares were also lifted by an upgrade to "buy" from RBS.
Also in the financial sector, hedge fund firm Man Group sagged 3.7 percent after the net asset value of its main AHL fund fell 2.2 percent.
A slew of companies going ex-dividend also hurt the index. British American Tobacco, Hammerson, Pearson, Prudential, SABMiller, Scottish & Southern Energy and Thomson Reuters all fell after trading without the rights of dividend.
Bank of England Governor Mervyn King and two other Monetary Policy Committee (MPC) members wanted to raise Britain's quantitative easing programme by 75 billion pounds this month but were outvoted by their six colleagues.
The six-three split vote revealed in the minutes of the MPC's Aug. 5-6 meeting published on Wednesday -- which showed Tim Besley and David Miles had joined King -- sent shockwaves through currency and bond markets, which had been expecting a unanimous vote in favour of the 50 billion pounds extension, although equities remained largely unmoved.
Elsewhere, British manufacturing orders fell slightly more than expected in August but firms were less gloomy about their future production than at any time in the last year, a survey showed. (Additional reporting by Jon Hopkins; editing by Karen Foster)