* Oil up for third day
* Storm Gustav could gain strength
* Focus on U.S. government oil data
(Updates prices)
LONDON, Aug 27 (Reuters) - Oil rose for a third day on
Wednesday, boosted by the possibility that Tropical Storm Gustav
could become the first major storm since 2005 to threaten Gulf
of Mexico oil and gas installations.
Crude for October delivery <CLc1> was up 93 cents at $117.20
a barrel by 1312 GMT, after settling up $1.16 on Tuesday. London
Brent crude <LCOc1> was up 74 cents at $115.37 a barrel.
Oil could head towards last week's near-three-week high of
just above $122 a barrel in the next few days depending on the
weather in the Gulf of Mexico, said Masaki Suematsu, analyst at
broker Newedge in Tokyo.
"Gustav is headed right toward the centre of the Gulf of
Mexico. Hurricanes taking this route are usually threatening,"
he said.
Gustav was downgraded to a tropical storm on Wednesday after
it came ashore in Haiti, but forecasters expect wind speeds to
regain hurricane force. []
Most computer models used to predict hurricane paths showed
Gustav headed towards Louisiana and Texas, where rigs produce a
quarter of U.S. crude oil.
"Between now and the weekend, we could see crude prices
encounter a fair measure of support, as the uncertain path of
the storm generates the usual consternation," said Edward Meir
of broker MF Global.
Three years ago, Hurricanes Katrina and Rita crippled
production in the region.
U.S. dollar weakness, which has contributed to oil's record
run this year, provided support to the market. The U.S. currency
fell against the euro, after a six-month high the previous day.
FUNDAMENTAL IMPACT
Tensions between Russia and the West escalated after U.S.
President George W. Bush condemned Russia for recognising
breakaway regions in Georgia. []
"We are not convinced that this crisis will be bullish for
the energy markets as any 'punishment' meted out by the West
will steer well clear of Russia's energy sector," Meir said.
Oil hit a record peak of $147.27 on July 11, propelled by
the weak dollar, investment inflows and concerns about the
long-term supply outlook.
But it has fallen back sharply since then partly in response
to increased supply from Saudi Arabia, the world's biggest
exporter and a drop in demand because of high prices.
On Tuesday, the U.S. Energy Information Administration
reported that oil demand in the world's top energy consumer in
June fell 5.6 percent from a year ago.
Nobuo Tanaka, executive director of the International Energy
Agency, said Saudi Arabia's increase plus a drop in demand
especially in the United States had helped prices to fall.
"The market has started responding to fundamentals," he told
Reuters. "What I expect from OPEC is to keep pumping at the same
level after the increase." []
The Organization of the Petroleum Exporting Countries is due
to meet next on September 9 to review output levels.
The market is awaiting latest weekly oil inventory data from
the EIA, due at 10:35 a.m. EDT (1435 GMT).
An Reuters poll of analysts showed an average forecast for a
1 million-barrel rise in U.S. crude stocks and a 500,000 barrel
build in distillates.
Gasoline inventories are projected to fall 2.9 million
barrels, a fifth straight weekly decline, as refiners were seen
drawing down inventories of summer-grade gasoline. []
(Reporting by Jane Merriman in London and Osamu Tsukimori in
Tokyo)
