Oil prices were steady near $79 a barrel as the fading Tropical Depression Bonnie brought more output back online in the Gulf of Mexico, dampening otherwise buoyant sentiment following positive U.S. macroeconomic data.

Nearly 50 percent of oil capacity in U.S.-regulated areas of the Gulf of Mexico was estimated to be shuttered at one point at the weekend and is now coming back onstream.

U.S. oil prices fell 15 cents to $78.81 a barrel by 5:37 a.m. ET on Tuesday. The previous day prices closed flat after briefly rallying on stronger U.S. homes sales.

ICE Brent fell 23 cents to $77.27 a barrel by the same time.

With most complexes now at the top of their respective trading ranges and things fairly clear on the storm front, we suspect prices will likely head a little lower into the trading range, said analyst Edward Meir at MF Global in a research note.

The risk of output disruptions caused by hurricanes in the U.S. Gulf tends to pack a premium into oil prices in the summer.

Forecasters have said the 2010 Atlantic hurricane season could be the worst since 2005 but Bonnie is so far only the season's second named tropical storm.

Rallying European shares -- which hit a five-week intraday high on Tuesday on better bank results -- provided some support to oil prices. .EU


Oil prices are now at a critical juncture and it remains to be seen if they will break into a new range above the $70-$80 a barrel where they have traded since early June, analysts said.

It's a mixed set of signals. The market is considering a move above $80 and if they do it will be seen as a positive sign. Should they stay below $80 a further drop cannot be ruled out as people will point to a double dip recession and a Chinese slowdown, said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.

Some technical analysts think oil prices could soon test the $80 a barrel range following a breach of the key 200-day moving average technical level last week

Industry group the American Petroleum Institute will publish data on U.S. inventories at 2030 GMT on Tuesday, followed by government statistics from the Energy Information Administration on Wednesday.

U.S. crude oil inventories probably fell 1.8 million barrels last week, a Reuters survey showed, while supplies of distillate fuel, including diesel, may have climbed for the ninth consecutive week and gasoline for the fifth, even as summer demand peaks.

Iran said on Monday it was ready to return to talks on a nuclear fuel swap, a surprise that came shortly after the European Union agreed tougher sanctions, including a block on oil and gas investment.

There is some suggestion that Iran might be giving up. This could lead to a decrease in the risk premium in the market but it's not clear yet, said Weinberg.

(Additional reporting by Alejandro Barbajosa in Singapore; editing by Keiron Henderson)