UPDATE 7-Oil prices fall as weak China data, stronger dollar drag

* China's rail freight volumes log steepest ever decline in
2015
* Middle East tensions rise as Kuwait recalls Iran
ambassador
* Islamic State targets Es Sider oil port in Libya
* Genscape says expects rise in weekly U.S. crude stocks

(Adds Algeria refinery explosion, updates prices)
By Karolin Schaps
LONDON, Jan 5 (Reuters) - Oil prices fell on Tuesday on
concerns about the pace of economic growth in China and a
stronger U.S. dollar, handing back some of the gains triggered
by an escalation of tensions in the Middle East.
Global benchmark Brent crude prices LCOc1 were down 17
cents at $37.05 a barrel at 1314 GMT. U.S. West Texas
Intermediate (WTI) crude CLc1 slipped 7 cents to $36.69 a
barrel.
"It is the Chinese stock market sell-off and the strong
dollar that are pressuring oil," said Tamas Varga, oil analyst
at London brokerage PVM Oil Associates.
Chinese stock markets fell again on Tuesday after a 7
percent dive on Monday, rattling markets worldwide and prompting
action from the central bank and stock market regulator.

Concerns about the economy in China, the world's
second-largest oil consumer, were worsened by news that national
rail freight volumes logged their biggest ever annual decline in
2015.
"Last year we talked about supply and demand even surprised
on the upside. But with this news flow from China, demand fears
have come back," said Frank Klumpp, oil analyst at
Stuttgart-based Landesbank Baden-Wuerttemberg.
The U.S. dollar .DXY hit a one-month high against a basket
of other currencies, weighing on oil prices as it made holding
dollar-denominated commodities more expensive. FRX/
The oil market largely shrugged off rising political
tensions in the Middle East. On Tuesday, Kuwait recalled its
ambassador to Iran following attacks on Saudi missions by
Iranian protesters, state news agency KUNA reported.

Analysts said as long as the conflict did not impact oil
production in the region it would not have a consequence for oil
prices.
ANZ bank said the tensions between Saudi Arabia and Iran
will "reduce the likelihood of any collaboration between the two
oil majors regarding oil output as Iran re-enters the
international market once sanctions are lifted".
In Libya, Islamic State militants resumed attacks on oil
infrastructure, hitting an oil storage tank in the port of Es
Sider.
This followed clashes on Monday during which an oil storage
tank holding around 400,000 barrels of crude exploded.

The ports are not currently operating, but analysts said
Islamic State's growing presence in oil-rich Libya means the
country will unlikely regain pre-crisis production levels any
time soon.
In Algeria, an explosion and fire at its Skikda oil refinery
injured 18 people, but production was unaffected as the incident
occurred in a unit used to fill butane bottles.
Data from U.S. industry group American Petroleum Institute
expected at 4:30 p.m. ET (2130 GMT) will give an indication of
U.S. crude inventory levels.
Genscape data published on Monday said crude inventories at
Cushing, Oklahoma, had reached an all-time high in the week
ending Jan. 1.
A Reuters poll indicated stocks had fallen 500,000 barrels
in the week. EIA/S