Oil prices fell on Tuesday to around $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 fell 27 cents to $79.16 a barrel by 1032 GMT (5:32 a.m. EST), after settling up $2 on Monday.

London Brent crude was down 23 cents to $77.54.

The International Energy Agency published its annual World Energy Outlook on Tuesday, forecasting a rise in primary energy demand globally by 1.5 percent every year until 2030, and calling for $26 trillion in investment to meet the expected demand.

Market reaction to the report was negligible because the annual report is a projection on the basis of a scenario, trying to look 20 years out, Harry Tchilinguirian, senior oil analyst at BNP Paribas, said.

Long term it's an important guideline, but any reactions in oil short-term will be on dollar moves, equity markets and central bank decisions, he said.

Market-wise, the big issue is how commodities are being targeted by investors looking for yield as a result of accommodative monetary policy, Tchilinguirian said.

HURRICANE DOWNGRADED

Hurricane Ida, the first real weather threat to oil production of the 2009 season, was downgraded to a tropical storm on Monday, but output 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.

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 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. The dollar edged up slightly off its lows on Tuesday, however.

Larger-than-expected increases at the pump in China on Monday suggested 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.

(Additional Reporting by Felicia Loo in Singapore; editing by Anthony Barker)

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