Oil prices fell to below $79 a barrel on Tuesday, as tropical storm Ida, which cut U.S. oil and gas supplies, was downgraded from a powerful hurricane and U.S. crude oil stockpiles were forecast to rise slightly.
U.S. crude for December delivery fell 73 cents to $78.67 a barrel by 0756 GMT (2:56 a.m. EST), after settling up $2 on Monday.
London Brent crude was down 71 cents to $77.06.
Although oil prices have risen 77 percent so far this year, they are still nearly 47 percent below their high of more than $147 a barrel struck in July last year.
People are more confident about a global recovery due to positive economic news except for the (U.S.) unemployment numbers which are a lagging indicator, said Tony Nunan, risk management executive at Mitsubishi Corp in Tokyo.
Asian stocks rose on Tuesday after U.S. equities hit a 13-month high and helped dull the allure of government debt, as the Group of 20 finance ministers pledged to keep economic stimulus programs in place until a recovery was assured.
The U.S. economy is projected to expand 2.7 percent next year, the Blue Chip Economic Indicators newsletter for November
said. That marked an upward revision from the 2.5 percent pace the survey panel had expected a month ago.
A bigger-than-expected increase in China's pump prices on Monday suggested that Beijing saw little danger of the inflationary worries that beset price rise decisions as little as a year ago.
The 7-percent rise in China's retail gasoline and diesel prices, or 480 yuan ($70.32) per tonne, is not seen curbing Chinese oil demand, which is instead expected to grow and support global oil markets.
On signs of strong Chinese oil needs, crude oil imports via the China-Kazakhstan pipeline increased 20.2 percent from a year ago to 147,750 barrels per day by October 24, China's customs said.
However, Albert Edwards, a top analyst with French bank Societe Generale
The U.S. dollar fell to a 15-month low against a basket of major currencies, lifting gold prices to a new record and the euro above $1.50, and further lending support to oil prices.
The weakness in the greenback was due to expectations for U.S. interest rates to stay near zero that prompted investors to use it as funding for carry trades in higher yielding assets.
Ida, the first real storm threat of the 2009 season, was downgraded from a hurricane on Monday, but production remained curtailed as producers waited for the storm to pass over the Gulf.
Ida shut in 29.6 percent of oil production and 27.5 percent of gas output from the Gulf of Mexico, the U.S. Minerals Management Service said Monday.
U.S. crude oil inventories last week look to have risen slightly due to higher imports, according to analysts polled by Reuters late on Monday.
Industry group American Petroleum Institute (API) will release weekly inventory data later on Tuesday, while a report from the U.S. Energy Information Administration (EIA) will be delayed from Wednesday to Thursday due to a holiday.
(Reporting by Felicia Loo; Editing by Clarence Fernandez)