* Oil bounces off lows as Hurricane Gustav strengthens
* Investors eye tension between West and Russia
* German recession risk grows, business morale down
(Updates prices, hurricane details)
LONDON, Aug 26 (Reuters) - Oil rose nearly $2 to around $117
a barrel on Tuesday, as concerns grew about possible disruption
to U.S. offshore oil and gas output from a strengthening
Hurricane Gustav.
The U.S. National Hurricane Center said Gustav, a category
one hurricane, had strengthened slightly in the central
Caribbean as it churned toward southwestern
Haiti.[]
Weather models showed it either heading in a westerly
direction toward Mexico's Yucatan Peninsula or steering
northwest and moving into the central Gulf of Mexico by early
Sunday, to potentially disrupt offshore oil and gas production.
U.S. crude <CLc1>, which fell more than $2 earlier in the
session, was $1.86 higher at $116.97 by 1444 GMT. London Brent
crude <LCOc1> rose $1.59 to $115.62.
Eric Wilhelm, a senior meteorologist at AccuWeather Inc,
said Hurricane Gustav may threaten production areas off the
coasts of Louisiana and Texas by the middle of next week by
which time the storm may have gained in intensity to be a major
hurricane.
"All of the oil platforms off Texas and Louisiana will
probably be at risk, but that's real long-range," Wilhelm told
Reuters, adding that Gustav was expected to enter the Gulf of
Mexico by Monday possibly as a category 3 hurricane.
Earlier, oil fell as the dollar hit a six-month high against
the euro on Tuesday after weak German data highlighted a
flagging euro zone economy. Dollar strength can limit the appeal
of oil and commodities as an inflation hedge.
"Short term trading on oil should now be dominated this week
by tracking Gustav," said Olivier Jakob, oil analyst at
Petromatrix in Zug, Switzerland.
Germany said its gross domestic product (GDP) contracted by
0.5 percentage points on the quarter in the April-June period,
the first contraction since 2004 and raising concerns Europe's
biggest economy could be headed for a recession. []
Oil has fallen sharply from a record high of $147.27
reached on July 11 in part due to evidence of a global
slowdown in energy demand. It remains up about 15 percent
so far this year.
Investors were also keeping an eye on tension between the
West and Russia over Georgia.
Russia on Tuesday recognised two rebel regions of Georgia --
South Ossetia and Abkhazia -- as independent states, defying
pressure from the United States and other western powers.
While the conflict in Georgia has led to some disruption in
Azeri oil shipments through Georgia, analysts said this latest
developent was having little influence on oil prices so far.
"Energy markets have not yet focused on what this latest
escalation could mean for a potential disruption in energy
supplies," said Edward Meir, analyst at MF Global, in a report.
"Until we get better clarity on this latter issue, we expect
the price reverberations from this situation to be relatively
contained."
(Additional reporting by Osamu Tsukimori and James Topham in
Tokyo and Alex Lawler in London; editing by William Hardy)
