* Oil slips to near $120 following Thursday's 5 percent gain
* Focus on tensions between Russia and the West
* Eyes on dollar, OPEC September meeting
(Recasts, adds comment, updates prices)
By Santosh Menon
LONDON, Aug 22 (Reuters) - Oil eased towards $120 on Friday,
a day after its biggest jump in three months as part of a wider
commodities rally spurred by a slump in the U.S. dollar, and
mounting tension between the United States and Russia.
U.S. light crude for October delivery <CLc1> fell 64 cents
to $120.54 a barrel by 0936 GMT, after surging nearly 5 percent
Thursday. London Brent crude <LCOc1> fell 62 cents to $119.54.
Thursday's rally has left analysts divided, with some
calling a temporary spurt, while others, notably those at
long-time oil bull Goldman Sachs, saying market fundamentals
point to firm prices.
MF Global analyst Edward Meir said the $6 rise on Thursday
was probably a dead cat bounce, a technical expression that
denotes a brief rally in a falling market.
"At this stage of the game, we think the dead cat bounce
theory has more credibility...Our negative view of the market is
based on our belief that yesterday's move was way overdone,"
Meir said.
Prices were also weighed down by evidence of rising OPEC
supplies.
Industry consultant Petrologistics said on Friday OPEC oil
output is expected to rise in August by 450,000 barrels per day
to 32.95 million bpd due to higher supply from Iran and Angola.
RECOVERY
However, oil has recovered around $9 from last Friday's
four-month low, ending a dramatic slide of more than $35 from
the record high of $147.27 a barrel hit on July 11 that was
triggered by worries about slowing global demand.
Oil has been boosted by rising tension between Russia and
the West over Moscow's actions in neighbouring Georgia, which
has once again highlighted the oil market's vulnerability to any
supply disruptions.
Russia's conflict with Georgia has already disrupted the
transit of Azeri oil through the region, and traders fear the
situation could worsen.
Russia, the world's second-largest oil exporter, said on
Thursday it would respond with more than just a diplomatic
protest to a U.S. deal with Poland to station parts of a U.S.
missile defense shield on Polish soil.
A steep fall in the dollar on Thursday amid worries of wider
credit-related losses at some U.S. financial firms saw investors
reinstating their long-commodities/short-dollar positions,
driving prices across a raft of commodities higher.
The dollar limped up on Friday after suffering its biggest
daily drop in five months a day before. The U.S. greenback had
touched an eight-month high earlier this month.
Dealers are also beginning to weigh up possible Organization
of the Petroleum Exporting Countries policy at its meeting on
Sept. 9.
(Additional reporting by Felicia Loo in Singapore; editing by
James Jukwey)
