Oil down, retreats from 3-1/2 year high ahead of U.S. holiday

* Iran's Rouhani raises prospect of disrupted oil shipments

* Canada outage drains U.S. crude, product inventories

* Coming Up: API U.S. inventory report 4:30 p.m. EDT/2030 GMT (New (KOSDAQ: 160550.KQ - news) throughout, updates prices, market activity and comments)

By Jessica Resnick-Ault and Andres Guerra Luz

NEW YORK, July 3 (Reuters) - Crude prices fell on Tuesday in volatile trading after early gains had lifted the U.S. benchmark past $75 a barrel for the first time in more than three years, which prompted traders with bullish positions to book some profits ahead of the July Fourth U.S. holiday.

Crude rallied early on supply concerns, then slid as traders booked profits and bet that global supply shortages would not persist as long as expected.

U.S. light crude was down 25 cents to $73.69 a barrel by 12:43 p.m. EDT (1643 GMT), rebounding from a session low of $72.73 a barrel. In early trade, the contract rose as high as $75.27, a 3-1/2-year high. Benchmark Brent crude was down 10 cents at $77.20 a barrel. Brent traded as low as $76.67 and as high as $78.85 during the session.

The early gains came after Iran appeared to threaten to disrupt oil shipments from the Middle East Gulf if Washington pressed ahead with sanctions. U.S. crude rose above $75 a barrel for the first time since 2014.

Prices retreated as some thought talk of supply disruptions might be overblown, said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut. He also said traders could be moving to liquidate bullish positions.

Pressure to liquidate may have accelerated ahead of the U.S. holiday on Wednesday, said Tariq Zahir, managing member at Tyche Capital (Other OTC: CGHC - news) in New York.

Traders said supply disruptions could be short lived as OPEC and allied producers ramp up output.

The United Arab Emirates is ready to help alleviate possible oil shortages and OPEC will aim to adhere to the group's "overall conformity levels," said UAE Energy Minister Suhail al-Mazrouei, who holds the OPEC presidency for 2018.

Traders also debated when production would restart at Syncrude Canada's 360,000 barrels per day (bpd) oil sands facility near Fort McMurray, Alberta, hit by a power outage last month and likely to remain offline through July. A quicker restart could boost supplies at the Cushing, Oklahoma, delivery hub for U.S. crude.

Oil's early gains came after the website president.ir quoted Iranian President Hassan Rouhani as dismissing Washington's attempt to stop Iran's oil exports. While the comments were ambiguous, Iranian officials in the past have threatened to block the Strait of Hormuz, a major oil shipping route, in retaliation for any hostile U.S. action.

Asked whether he intended to make a threat, Rouhani declined to provide a clarification.

"Just the threat ... would add uncertainty and warrant a certain risk premium," Carsten Fritsch, senior commodities analyst at Commerzbank (Xetra: CBK100 - news) , told Reuters Global Oil Forum.

The American Petroleum Institute will report estimates for U.S. inventories at 4:30 p.m. EDT (2030 GMT) on Tuesday.

(Additional reporting by Henning Gloystein in Singapore and Christopher Johnson in London Editing by David Gregorio and Jan Harvey)