Oil falls to new 5-month lows, awaits OPEC

LONDON (Reuters) - Oil prices fell to a new five-month low on Tuesday, pressured by a rise in the U.S. dollar and expectations that OPEC will not cut output when it meets later in the day.

U.S. crude for October delivery was down $1.39 a barrel at $104.95 by 5:31 a.m. EDT, after briefly falling more than $2 to touch a new five-month low of $104.23 a barrel.

London Brent crude was $1.41 down at $102.03 a barrel, closing in on the $100 mark.

The dollar's rise to a one-year peak against a basket of currencies has spurred a shift away from commodities that has driven down prices across the spectrum.

Oil is under pressure despite the potential threat from Hurricane Ike, which is headed towards the U.S. Gulf and offshore oil fields that produce a quarter of U.S. oil and 15 percent of its natural gas.

"If it weren't for the hurricanes, oil should be below $100 a barrel, considering the sentiment," said Tetsu Emori, fund manager at Astmax Co Ltd.

Oil has fallen nearly 30 percent from a record peak of $147.27 a barrel on July 11, depressed partly by a fall in demand from the world's top energy consumer the United States, where the economy is battling to ward off recession.

Members of the Organization of the Petroleum Exporting Countries have expressed concern about rising oil supplies, but are not expected to go as far as agreeing to cut output.

Ali al-Naimi, oil minister from Saudi Arabia, the world's largest exporter, said oil markets were fairly well balanced.

"I think everything is in balance -- inventories are in a healthy position."

The producer group may favor stricter compliance within existing output targets, rather than a cut in the targets, the head of Libya's OPEC delegation Shokri Ghanem told Reuters.

"I don't think the general mood is talking about the (output) ceiling," he said. "Rather (it is) at this stage watching the market carefully and trying to insist on compliance."

The impact of last week's Hurricane Gustav and the approach of Hurricane Ike could impact weekly U.S. government data on oil inventories, due on Wednesday.

"We will see more than the usual amount of draws coming out of inventories both this week and next," said Edward Meir of broker MF Global.

U.S. crude oil stocks are forecast to have fallen last week by 4.3 million barrels after Gustav shut down fields, a preliminary Reuters poll of analysts showed.

Gasoline stocks were seen falling by 4.2 million barrels and distillates by 2.5 million barrels.

(Reporting by Jane Merriman in London and Angela Moon in Seoul, editing by Anthony Barker)