Oil prices swung around $79 a barrel Tuesday, as a storm threatening oil installations in the Gulf of Mexico weakened and investors eyed a volatile dollar.
By early afternoon in Europe, benchmark crude for December delivery was down 7 cents to $79.36 a barrel in electronic trading on the New York Mercantile Exchange. The contract was moving in a range between $78.55 and $79.55.
Tropical Storm Ida weakened Monday from a hurricane as it neared Gulf Coast oil facilities, easing concern it could disrupt supply when it reaches land later Tuesday.
"Damage to production facilities is expected to be minimal and personnel evacuation from offshore rigs is expected to prove temporary," said Galena, Illinois-based Ritterbusch and Associates in a report.
Analyst Olivier Jakob from Switzerland's Petromatrix said that while "one cannot totally exclude disruptions (like flooding) there is enough idle capacity in the U.S. refinery system to compensate for a limited incident."
On Monday, the contract rose $2 to settle at $79.43 as the dollar weakened, making crude cheaper for investors with other currencies.
The euro, which broke above $1.50 on Monday, was down to $1.4991 from $1.4999 the previous day while the British pound was also lower, at $1.6671 from $1.6752. The dollar rose to 90.04 Japanese yen from 89.99 yen.
While U.S. stock markets rose to their 2009 highs Monday on investor optimism about the global economic recovery, oil is still below its peak for the year of $82 on concern growing U.S. unemployment will undermine demand.
"It does appear that the rising unemployment rate is casting a larger shadow over domestic petroleum consumption than had previously been the case," Ritterbusch said.
In other Nymex trading, heating oil fell 0.20 cent to $2.0607 a gallon. Gasoline for December delivery dropped 0.72 cent to $1.9746 a gallon. Natural gas for December delivery slid 7.5 cents to $4.595 per 1,000 cubic feet.
In London, Brent crude for December delivery rose 2 cents to $77.79 on the ICE Futures exchange.
Associated Press writer Alex Kennedy in Singapore contributed to this report.