UPDATE 3-Oil drops to $79 as hurricane weakens

                                
 * Threat of storm in U.S. Gulf of Mexico eases
                                
 * Higher U.S. crude oil stocks seen
                                
 * Price support from global stock surge, weak dollar

                                
 (Updates throughout, previous SINGAPORE)
                                
 By Chris Baldwin
                                
 LONDON, Nov 10 (Reuters) - Oil prices fell on Tuesday to $79
a barrel as a late-season hurricane subsided in the Gulf of
Mexico and traders awaited key U.S. inventory data.
                                
 U.S crude for December delivery <CLc1> fell 43 cents to $79
a barrel by 0852 GMT, after settling up $2 on Monday.
                                
 London Brent crude <LCOc1> was down 39 cents to $77.38.
                                
 Hurricane Ida, the first real weather threat to oil
production of the 2009 season, was downgraded to a tropical
storm on Monday, but production remained curtailed as producers
awaited its passage out of 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. [ID:nN09518842]
                                
 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. [EIA/S]
                                
 Industry group the 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 federal holiday.
                                
 Oil prices have rallied 77 percent so far this year, from a
low of below $33 in December, though they are still nearly 47
percent below their high of more than $147 a barrel touched in
July last year.
                                
 "The catalyst for this rally has been, in our view,
long-anticipated signs of improvement in oil fundamentals in the
context of generally constructive economic data," analysts at
Goldman Sachs wrote in their Commodity Watch note to investors.
                                
 "Strong emerging market demand has pulled supply elsewhere,
reducing U.S. petroleum imports. Specifically, Chinese oil
demand continues to surge, driven by strong economic activity."
                                
 
                                
 FEEBLE DOLLAR
                                
 Further support for oil prices has come as 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.
                                
 Dollar weakness was due to expectations for U.S. interest
rates to stay near zero. [ID:nSYD468706]
                                
 The dollar edged up slightly off its lows on Tuesday,
however. [USD/]
                                
 The U.S. economy is projected to expand 2.7 percent next
year, the Blue Chip Economic Indicators newsletter for November
said, marking an upward revision from the 2.5 percent pace the
survey panel had expected a month ago. [ID:nN09273645]
                                
 Larger-than-expected increases at the pump in China on
Monday suggested that Beijing saw little danger from the
inflationary worries that beset price rise decisions just 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. [ID:nSP445713]
 (Additional Reporting by Felicia Loo in Singapore; editing by
Anthony Barker)