* Gulf Arab OPEC members, Saudi Arabia seen favoring hike
* Tropical cyclone possibility limits oil price drop
* Coming up: API oil stocks data, 4:30 p.m. EDT Tuesday (Updates stock market result, inventory estimates, paragraphs 5, 11)
By Robert Gibbons
NEW YORK, June 6 (Reuters) - Oil fell on Monday in thin and choppy trading on raised expectations OPEC will raise production targets this week and concerns about the economic outlook.
Worried that oil prices near $115 a barrel are hitting economic growth, Gulf producers including Saudi Arabia favor an increase in output when the Organization of the Petroleum Exporting Countries meets on Wednesday. [ID:nLDE7551VM]
OPEC delegates gathering in Vienna said a deal to do more than close the gap between the official output target and actual production -- about 1.4 million barrels per day -- could prove difficult due to opposition from price hawks such as Iran and Venezuela. [ID:nLDE7540D1]
Oil prices leading up to the OPEC meeting have been fairly rangebound, with Brent crude trading between $114 to $117 a barrel over most of the past two weeks.
Brent crude for July delivery
U.S. July crude
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Is the global economy slowing? http://r.reuters.com/pad89r
U.S. crude stock levels: http://link.reuters.com/syh89r
OPEC production and targets: http://r.reuters.com/zyg89r
A 24-hour technical outlook on U.S. oil [ID:nL3E7H3039]
For a 24-hour outlook on Brent crude [ID:nL3E7H3043]
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DOLLAR, STORMS
The dollar recovered against the euro and the dollar index <.DXY> also turned slightly higher, after early weakness had supported dollar-denominated oil prices. [USD/] U.S. stocks ended lower and the S&P 500 slumped to its lowest level since March on signs of a slowing economy. [.N]
"Today's lower (oil prices are) largely related to the usual bearish combo of stronger dollar and a soft stock market," Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois, said in a note.
"Some positioning ahead of the upcoming OPEC meeting also likely prompted some selling as some key oil ministers appear to be sending out overtures of an increase in production quotas," said Ritterbusch.
Additional pressure on prices came on news TransCanada
Corp's
The market was also watching a low pressure system in the northwestern Caribbean Sea, which the National Hurricane Center said had a 50-percent possibility of becoming a tropical cyclone developing over the next 48 hours.
A few computer models forecast the Caribbean system to move northwest over western Cuba and reach the U.S. Gulf of Mexico, potentially threatening offshore oil and natural gas production, over the next few days. Other models forecast it to move northeast toward eastern Cuba and the Atlantic. [ID:nL3E7H62JA]
Ahead of closely watched weekly U.S. inventory reports from industry and government, U.S. crude oil inventories were estimated to have fallen slightly last week, a Reuters poll of analysts on Monday showed. Gasoline and distillate stockpiles were expected to be higher. [EIA/S]
POTENTIAL SUPPLY THREATS
Traders also eyed ongoing turmoil in Yemen and Syria. The United States called on Yemen to move towards democracy while President Ali Abdullah Saleh recovers from shrapnel wounds in Saudi Arabia. Yemen's acting leader insisted Saleh would return in days. [ID:nLDE7550AA]
Syria's government said it will respond firmly to armed attacks after state television said gunmen killed more than 80 security members in a northwestern town. [ID:nLDE7552AZ]
The Nigerian army said it was investigating a purported threat by the Niger Delta's main militant group to attack oil industry facilities in the OPEC nation. [ID:nLDE7551LO] (Additional reporting by Gene Ramos in New York, Jessica Donati in London and Rebekah Kebede in Perth; Editing by David Gregorio and Marguerita Choy)