* Oil falls as U.S. dollar hits 11-month high versus euro
* Hurricane Ike churns towards Gulf of Mexico
* OPEC expected to leave formal output target unchanged
(Updates prices, details throughout)
By Ikuko Kao and Matthew Robinson
LONDON, Sept 8 (Reuters) - Oil fell on Monday as part of a
broad selloff in the commodities markets after the U.S.
government's takeover of mortgage financiers Fannie Mae and
Freddie Mac fueled a run up in the U.S. dollar.
Dealers said the greenback's gains overshadowed a new
hurricane threat heading for the U.S. Gulf of Mexico, home to a
quarter of U.S. crude oil production and 15 percent of its
natural gas output.
"I think it is because the dollar is pretty strong after
the Fannie and Freddie bailout," said Phil Flynn, analyst at
Alaron Trading in Chicago, refering to oil's losses. A strong
dollar tends to soften commodities markets by weakening the
purchasing power of buyers using other currencies.
U.S. crude futures <CLc1> fell $1.27 to $104.96 a barrel by
1630 GMT after dipping as low as $104.70 -- the lowest since
early April -- adding to heavy losses since mid-July's peak
over $147 on weaker energy demand from the United States and
other developed economies.
London's Brent crude futures <LCOc1> fell $1.55 to $102.54
a barrel after a problem with the trading system halted all
activity on the Intercontinental Exchange <ICE.N> for more than
an hour. Trading resumed at 1355 GMT.
Despite oil's losses, OPEC ministers gathering in Vienna
for their output policy meeting scheduled for Wednesday were
expected to leave formal production targets unchanged due to
the threat from Hurricane Ike to U.S. oil output. []
""Whilst observing the goings on in Vienna over the next
few days, keep one eye on Hurricane Ike,"" Robert Laughlin with
MF Global said.
Preparations for Ike have stalled recovery efforts after
last week's Hurricane Gustav, which shuttered oil production
and refineries in the region as it barrelled onshore.
[]
Ike weakened into a Category 2 storm on Monday after
roaring ashore in northeastern Cuba, but was expected to
strengthen into a dangerous Category 3 hurricane when it enters
the Gulf of Mexico by midweek.
For a graphic on Hurricane Ike, please double click on:
https://customers.reuters.com/d/graphics/HR_IKE3.jpg
OPEC
OPEC ministers were widely expected to leave formal targets
unchanged when they meet late on Tuesday, as Ike gave prices a
lift following a two-month drop that has sent crude down from
record highs over $147 a barrel.
"I don't believe there is any possibility we will change
production levels," Ecuador's Oil Minister Galo Chiriboga told
reporters on Sunday.
Some ministers argued that the market was amply supplied
following months of overproduction led by Saudi Arabia.
"As a first step we need some discipline, some members are
producing above their commitment," Iran's OPEC governor
Mohammad Ali Khatibi told Reuters. []
"Any members who are producing more than their commitment
must come back to their commitment."
Officials from Saudi Arabia, the world's top exporter, have
not yet arrived in Vienna to comment on output policy.
The head of the International Energy Agency, adviser to 27
industrialised countries, said on Monday OPEC should maintain
output levels to help bring down oil prices. []
High fuel prices and the wider economic crisis have clipped
demand in the United States, sending prices down nearly 30
percent over two months after surging demand from China and
other developing economies sent crude on a six-year rally.
Hopes that a U.S. bailout of top mortgage lenders Fannie
Mae and Freddie Mac would help temper an economic downturn also
provided some support to the oil market in early activity.
[]
(Reporting by Ikuko Kao and Matthew Robinson in London, Fayen
Wong and Nick Trevethan in Perth, Richard Valdmanis in New
York; Editing by Anthony Barker and David Gregorio)
