Oil pressured by strong dollar after storm support

NEW YORK (Reuters) - Oil prices were nearly unchanged by midday Friday as a stronger dollar balanced concerns that Tropical Storm Gustav will impact U.S. offshore oil and gas production.

Earlier, crude prices had flirted with $119 a barrel on concerns that Gustav, which was poised to enter the Gulf of Mexico over the weekend as a hurricane, would damage offshore oil facilities in the gulf.

"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 (Hurricane) Katrina's arrival and then rallied again when it hit," Tom Knight, a trader at Truman Arnold in Texarkana, Texas, said.

U.S. crude was up 49 cents at $116.08 barrel by 1:43 p.m. EDT (1743 GMT), erasing Thursday's losses, which came after authorities pledged to release emergency stockpiles if Gustav disrupted U.S. oil output.

London Brent crude rose 4 cents to $114.21 a barrel.

Tropical Storm Gustav was forecast to strengthen into a hurricane by Friday or Saturday as it neared the Gulf of Mexico.

In anticipation, U.S. energy companies shut 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

(For a graphic showing Gustav's trajectory, please click on: here)

On Friday, Gustav was about 85 miles west of Kingston, Jamaica, packing winds near 65 miles per hour. When winds reach 74 mph, the storm will regain hurricane status.