* Gustav expected to enter the Gulf as major hurricane
* Strong dollar pressures oil, balancing Gustav support
(Recasts, updates prices, adds byline)
By Rebekah Kebede
NEW YORK, Aug 29 (Reuters) - Oil prices edged lower on
Friday as worries over potential damage to oil refineries and
platforms in the U.S. Gulf of Mexico subsided despite
projections that Hurricane Gustav will enter the Gulf of Mexico
as a major storm early next week.
U.S. crude oil futures for October delivery settled at
$115.46 a barrel, down 13 cents after flirting with $119 a
barrel earlier in the day. London Brent crude settled 12 cents
lower at $114.05 a barrel.
"It's surprising that relatively little hurricane premium
has been added to the market. Perhaps it's because refiners are
at present running only at 87 percent (of capacity) compared to
running at 97 percent when (Hurricane) Katrina hit," said
Nauman Barakat, senior vice president at Macquarie Futures
USA.
It "could be that at present demand destruction is the
engine that's driving the complex lower while at Katrina's time
of impact in August 2005 the talk was all about runaway
demand," Barakat added.
U.S. energy companies began shutting 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.
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.
"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.
Renewed strength in the U.S. dollar put further downward
pressure on oil prices. The dollar has risen by nearly 9
percent against the Euro since hitting a record low in mid-July
as concerns over economic growth prospects outside the United
States have mounted.
"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 Katrina's arrival and then rallied again when it
hit," said Tom Knight, a trader at Truman Arnold in Texarkana,
Texas.
RUSSIAN SHIPMENTS
Earlier Friday, oil prices received some support from a
report in Britain's Daily Telegraph newspaper citing a single
unidentified source saying 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.
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 scheduled meeting of the
Organization of Petroleum Exporting Countries on Sept. 9 where
the group will review 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.
(Additional reporting by Santosh Menon in London and Osamu
Tsukimori in Tokyo; editing by Jim Marshall)
