(Corrects year in seventh paragraph)

SINGAPORE - Oil edged up to $67 a barrel on Wednesday, recovering from the previous day's losses as the dollar weakened against the euro and resource currencies like the Australian dollar.

This allowed crude to reverse losses from the previous day, when U.S. crude and distillates stock builds, a downgrade to U.S. energy demand and low consumer confidence data continued a string of bearish signals that has put crude on course for its first quarterly fall this year.

Not all news has been negative, with U.S. house prices rising for a third month, while a Chinese purchasing managers index for September released on Wednesday showed strong growth continues in the world's second-largest oil consumer.

U.S. crude futures rose 29 cents to $67.00 a barrel by 10:44 p.m. EDT, after shedding 13 cents on Tuesday. London Brent crude gained 33 cents to $65.82 a barrel.

The markets are quiet ahead of China's week-long holidays.

Looking at the fundamentals, it is not justifiable for prices to be at current (strong levels), said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd, adding that investment funds hold the view that $60 oil is cheap.

He said that despite better economic conditions in 2006, oil prices were still ranging around the $60-70 levels seen recently.

Slowing demand in the United States and other developed economies after the financial crisis pulled down crude from records near $150 a barrel in July 2008 to below $33 a barrel in December, although hopes of an economic rebound have since lent support.

Although U.S. economic numbers are improving, the government's Energy Information Administration (EIA) still revised down its July estimates for oil demand by 133,000 barrels per day (bpd) to 4 percent below year-ago levels, the lowest July level in 13 years.

Also, U.S. crude stocks jumped a hefty 2.8 million barrels last week and distillates, which include heating oil and diesel, rose 2.3 million barrels, American Petroleum Institute data showed. Gasoline stocks fell 1.7 million barrels.

The EIA data will be out later on Wednesday. A Reuters poll forecast a 600,000-barrel rise in crude stocks, as weak margins pressured refinery demand; a 1.2 million-barrel build in distillates and a 1.0 million-barrel increase in gasoline inventories.

The mixed economic data from the U.S. showed that the economic rebound is still in its early days following the worst recession in decades, and it could be a long time before consumers contribute to growth, analysts said.

Tensions between the West and OPEC-member Iran over Tehran's nuclear program continue to be on traders' radars, as the White House weighed sanctions targeting Iran's dependence on gasoline imports and insurance firms that underwrite the trade.

(Editing by Michael Urquhart)

China