Oil falls on Ida recovery, stronger dollar

NEW YORK (Reuters) - Oil prices fell more than $1 to $78 a barrel on Tuesday as the dollar firmed and energy companies began restoring offshore operations disrupted by Tropical Storm Ida.

U.S crude for December delivery traded down $1.25 to $78.18 a barrel by 12:50 p.m. (1750 GMT). London Brent crude dropped $1.11 to $76.66 a barrel.

"Crude pulled back from its highs because the dollar bounced a bit and there was no sizzle after the Ida fizzle," said Andrew Lebow, broker at MF Global in New York.

Oil and natural gas companies operating in the Gulf of Mexico began returning workers evacuated ahead of Tropical Storm Ida and restoring shuttered output and ports.

Ida, which churned up to a category 2 hurricane earlier this week, weakened into a topical depression on Tuesday after coming ashore in Alabama.

The storm shut in nearly 30 percent of U.S. production in the Gulf of Mexico and 27.5 percent of the region's natural gas output on Monday, according to government figures. (For a factbox on operations, click

Disruptions in the Gulf, home to about 25 percent of U.S. domestic oil production and 14 percent of gas output, helped push crude prices up more than 2 percent on Monday.

U.S. oil markets have dropped from record highs near $150 a barrel to below $33 a barrel in December as the global recession hit energy demand.

Traders have looked to wider macro-economic data and equities markets for signs of an economic recovery that could bolster crude demand. Pressure on crude prices also came as the dollar firmed off a 15-month low, as investors pulled money out of equities and crude and into safer havens. [USD/] [.N]