UPDATE 4-Oil slips to around $124, demand weighs

                                
 * Oil eases to around $124, giving up earlier gain
                                
 * U.S. highway driving drops, May oil demand revised down
                                
 * Shell declares force majeure after Nigeria attack
                                
 * Reuters EIA poll sees crude and gasoline stocks down
                                
 
                                
 (Updates prices)
                                
 By Alex Lawler
                                
 LONDON, July 29 (Reuters) - Oil eased to around $124 a
barrel on Tuesday, reversing an earlier gain, as signs of
weakening demand and a rising dollar outweighed a disruption to
Nigerian oil output.
                                
 The drop also coincided with a firmer U.S. dollar, which may
have reduced the appeal of commodities to some investors, and
comments from OPEC's president that oil could fall to $70 or $80
in the long term.
                                
 "We still believe that crude's rallies are vulnerable and we
would advise not buying into them," said Edward Meir, analyst at
MF Global. "We are looking for an eventual retreat to $121 to
$122."
                                
 U.S. crude <CLc1> was down $1.03 at 123.70 a barrel by 1327
GMT, after a gain of $1.47 on Monday. Brent crude <LCOc1> was
off $1.13 at $124.71.
                                
 The president of OPEC, Chakib Khelil, on Tuesday called the
current price "abnormal" and said he did not think the producer
group should consider cutting output should prices continue to
fall as markets were now balanced.
                                
 Khelil, who is also Algeria's oil minister, said oil could
fall to $70 to $80 in the long term, if the U.S. dollar
continued to strengthen and geopolitical concerns eased.
                                
 Oil has fallen from a record peak of $147.27 on July 11,
pressured by signs that high prices and an economic slowdown are
curbing demand especially in the United States, the world's
largest oil consumer.
                                
 The chief executive of BP Plc <BP.L> Tony Hayward said on
Tuesday he saw demand destruction of 5 to 10 percent for
gasoline in developed OECD economies, as people drive less due
to high fuel prices.
                                
 The Energy Information Administration said on Monday U.S.
oil demand in May was 660,000 barrels per day less than
previously thought. A separate government report said motorists
were driving less.
                                
 Limiting oil's drop, Shell declared force majeure on Tuesday
on its Nigerian Bonny Light oil exports for July to September
following Monday's attack by militants on an oil pipeline in the
Niger Delta.
                                
 Tension over Iran's nuclear programme also provided support.
Iran is the second-largest producer in the Organization of the
Petroleum Exporting Countries.
                                
 Attention on Wednesday will focus on the latest snapshot of
U.S. oil supplies.
                                
 Crude oil stocks probably fell by 1.4 million barrels and 
gasoline dropped by 100,000 barrels, analysts said in a Reuters
poll. Distillates inventories are expected to rise by 1.7
million barrels. [EIA/S]
 (Additional reporting by James Topham; editing by James Jukwey)