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SYDNEY/LONDON, Aug 7 (Reuters) Oil prices slid further on Tuesday, extending the previous day's over $3 dive as speculators locked in profits on fears of higher borrowing costs and U.S. economic weakness.

U.S. crude oil futures fell 40 cents to $71.66 a barrel by 0831 GMT, after shedding $3.42 or 4.5 percent on Monday to close at their weakest level since early July. It was the biggest percentage loss since Jan. 4, 2007.

London Brent crude dropped 16 cents to $71.01 after shedding $3.58 a barrel on Monday.

''Investors are rushing for the doors...because they are worried that speculators are going to liquidate positions,'' said Tony Nunan, a risk management manager at Mitsubishi in Tokyo.

Prices have fallen 10 percent from their record high $78.77 a barrel a week ago, with the focus now shifting to Wednesday's weekly U.S. oil inventory data, likely to show a fifth consecutive fall in crude stockpiles.

Sharp losses in financial markets and signs of economic slowdown in the United States have reversed oil's rally since late June, overshadowing concerns about tightening U.S. crude supplies as refiners finally rev up operations.

U.S. crude inventories are expected to have fallen by 2.3 million barrels last week, a preliminary Reuters analyst poll showed on Monday.

Distillate supplies were expected to rise by 1.6 million barrels. Gasoline inventories also were forecast to rise by 900,000 barrels, with refinery capacity use expected to be slightly higher, up only 0.1 percentage point.

''If crude stocks fall more than expected, that could again stoke concerns of a supply squeeze and help to push up prices,'' said Gavin Wendt, an analyst at Fat Prophets.

The U.S. Energy Information Administration releases its oil inventory report Wednesday at 10:30 a.m. EDT (1430 GMT).

Despite calls from the United States and the International Energy Agency, OPEC officials have indicated a reluctance to raise output when ministers meet in September, fuelling worries of a supply crunch during the peak of winter heating demand.

But near-term fundamentals were set aside this week, as traders fretted over the prospect of increased borrowing costs and feared that data showing slower-than-expected job growth and weak service sector numbers could spell trouble for the economy, ultimately sapping oil demand from the world's biggest consumer.

U.S. stocks rebounded from last week's slump on Monday, gaining more than 2 percent in its sharpest one-day percent gain in four years. Asian markets were largely flat on Tuesday.

Speculators who built up record-long U.S. crude oil positions the previous week have been among the biggest sellers lately, traders say, although some analysts expected fundamentally supportive factors to once again come to the fore.

''While credit problems in the United States will likely create headwinds to the U.S. recovery, the impact on oil demand growth will likely be more limited as it is increasingly being driven by the emerging markets,'' Goldman Sachs Commodities said in a research note on Monday.

REUTERS SBA DS1440