* Oil extends decline, hovers above $114
* Oil drops 5.4 percent on Friday in biggest fall since Dec
2004
* Tropical Storm Fay hit landfall on Sunday
* Russia says its troops will remain in one of Georgia's
main Black Sea ports
By Fayen Wong
PERTH, Aug 25 (Reuters) - Oil deepened losses on Monday,
hovering just above $114 a barrel, on diminishing supply
concerns as Tropical Storm Fay crossed over land and on easing
geopolitical tensions as Russia withdrew the bulk of its troops
from Georgia.
But analysts said geopolitical tensions between United
States and Russia, the world's second-biggest oil producer,
would continue to lend support to prices until Moscow withdraws
its troops completely from Georgia.
U.S. light crude for October delivery <CLc1> fell 34 cents
to $114.25 a barrel by 2343 GMT. The contract fell $6.59, or
5.4 percent, to settle at $114.59 a barrel on Friday -- the
biggest one-day fall in percentage terms since Dec. 27, 2004.
Oil has fallen about 22 percent since its peak of above
$147 struck mid-July on concerns high energy costs are taking a
toll on global fuel demand.
"The easing of Tropical Storm Fay and the pullout of
Russian troops from Georgia has taken some risk premium out of
the market," said Toby Hassall, chief analyst at Commodity
Warrants Australia in Sydney.
"But there will be some degree of geopolitical tensions as
long as Russia still has troops stationed in Georgia."
Russia, which began to pull out the bulk of its forces from
Georgia last week, said on Saturday its troops would patrol one
of Georgia's main Black Sea ports, defying Western demands for
a complete pullback to positions held before fighting broke out
over a Georgian rebel region. []
The easing of Tropical Storm Fay, which poured rain along
the U.S. Gulf Coast on Sunday, also diminished concerns the
storm might disrupt oil and natural gas production at the Gulf
of Mexico production areas.
Energy companies, including Chevron Corp <CVX.N> ExxonMobil
Corp <XOM.N>, BP Plc <BP.L>, ConocoPhillips <COP.N> and Royal
Dutch Shell <RDSa.L> said they were keeping track of the storm
but their operations were not affected.
Analysts said the market would also keep a close watch on
the U.S. dollar, after its surge on Friday helped push oil
prices lower.
Oil's sharp fall on Friday was also prompted by reports
that showed an uptick in OPEC crude oil output and another
showing an expected decline in U.S. travel over the Sept. 1
Labor Day holiday weekend as high fuel prices hit consumers.
Industry consultant Petrologistics said on Friday OPEC oil
output was expected to rise in August by 450,000 barrels per
day, to 32.95 million bpd, a factor that could further beef up
inventory levels in consumer nations. []
The U.S. auto and travel group AAA said Labor Day holiday
travel was expected to fall this year by the largest amount in
at least eight years as consumers struggle with higher gasoline
prices and airfares.
(Reporting by Fayen Wong; Editing by Anshuman Daga)
