* Strong dollar pressures oil, balancing Gustav support
* Gustav expected to enter the Gulf as major hurricane
* Focus on OPEC, Georgia tensions ahead of U.S. holiday
(Updates prices; changes dateline from LONDON)
NEW YORK, Aug 29 (Reuters) - Oil prices were nearly
unchanged by midday Friday as a stronger dollar balanced
concerns that Tropical Storm Gustav will impact U.S. offshore
oil and gas production.
Earlier, crude prices had flirted with $119 a barrel on
concerns that Gustav, which was poised to enter the Gulf of
Mexico over the weekend as a hurricane, would damage offshore
oil facilities in the gulf.
"The dollar is up and so we're seeing prices of crude move
down from the highs. Remember that in 2005, the market sold off
hard before (Hurricane) Katrina's arrival and then rallied
again when it hit," Tom Knight, a trader at Truman Arnold in
Texarkana, Texas, said.
U.S. crude <CLc1> was up 49 cents at $116.08 barrel by 1:43
p.m. EDT (1743 GMT), erasing Thursday's losses, which came
after authorities pledged to release emergency stockpiles if
Gustav disrupted U.S. oil output.
London Brent crude <LCOc1> rose 4 cents to $114.21 a
barrel.
Tropical Storm Gustav was forecast to strengthen into a
hurricane by Friday or Saturday as it neared the Gulf of
Mexico.
In anticipation, U.S. energy companies shut down production
and evacuated personnel in the gulf, home to 25 percent of U.S.
crude oil production and 15 percent of natural gas output
(For a graphic showing Gustav's trajectory, please click
on: https://customers.reuters.com/d/graphics/gustav.jpg)
On Friday, Gustav was about 85 miles west of Kingston,
Jamaica, packing winds near 65 miles per hour. When winds reach
74 mph, the storm will regain hurricane status.
Forecasts showed the storm moving through key oil and gas
producing areas of the Gulf of Mexico as a powerful Category 3
hurricane, with winds between 111 and 130 mph.
As Gustav churned through the Caribbean, another storm,
Tropical Storm Hanna, formed in the Atlantic Ocean, on a path
that could threaten the Bahamas and Florida, the U.S. National
Hurricane Center said. []
However, uncertainty about the impact of Gustav led to
volatility in electronic trading ahead of the U.S. Labor Day
holiday on Monday, when New York Mercantile Exchange floor
trading will be shut. Electronic trading on Globex will not be
affected.
"Right now, there is still uncertainty on where exactly
Gustav will hit, and so it is difficult to determine the damage
that the storm might bring," said Mark Waggoner, president of
Excel Futures in Huntington Beach, California.
"It may be four days before it actually hits the Gulf
Coast, and the forecasts show a wide area where it may hit. So
some people are positioning, some are repositioning ahead of
the long weekend."
RUSSIAN SHIPMENTS
Oil received further support from a report in Britain's
Daily Telegraph newspaper that the Russian government had told
at least one of its oil companies to prepare for a possible cut
in shipments to Europe in response to threatened sanctions,
citing a single unidentified source. []
Russia's second-largest oil producer, LUKOIL, denied the
report. The country's energy minister said Moscow was doing
everything it could to ensure stable oil supplies to Europe and
to keep its good name as an energy supplier.
Traders were also eyeing a meeting of the Organization of
Petroleum Exporting Countries scheduled for Sept. 9 in Vienna
that will review the oil exporting group's output policy.
OPEC could cut output at the meeting but will most likely
maintain current production levels, Venezuela's Oil Minister
Rafael Ramirez said on Thursday.
(Reporting by Rebekah Kebede, with additional reporting by
Santosh Menon in London and Osamu Tsukimori in Tokyo; Editing
by Walter Bagley)
