Oil down to near $77 as stocks fall, dollar gains

Oil prices fell to near $77 a barrel Tuesday, affected by sagging equity markets and the dollar's gains on the euro.

By early afternoon in Europe, benchmark crude for December delivery was down 97 cents to $77.16 a barrel in electronic trading on the New York Mercantile Exchange.

Earlier Tuesday, it rose as high as $78.46 as investors welcomed new U.S. manufacturing and construction figures as positive signs of an economic recovery. On Monday, the contract rose $1.13 to settle at $78.13.

Crude investors were earlier encouraged by signs of strength in the U.S. economy, which could help boost oil demand.

The Institute for Supply Management said Monday that U.S. manufacturing activity grew in October at the fastest pace in more than three years, while the Commerce Department reported that September construction spending posted a better-than-expected performance.

And the National Association of Realtors said the volume of signed contracts to buy previously occupied homes rose for the eighth straight month in September.

However, equity gains were reversed later Tuesday amid fears over Britain's banking sector and another big loss at Swiss bank UBS AG.

"In the real world of oil nothing has really changed," said Olivier Jakob of Petromatrix in Switzerland, adding that oil prices are at the mercy of stocks and the U.S. dollar's exchange rate.

On Tuesday, the euro fell to $1.4645 in European trade, down from $1.4753 late Monday in New York. Oil prices tend to fall when the U.S. currency rises and makes dollar-denominated commodities less appealing to international investors.

The British pound rose to $1.6393 from $1.6383, while the dollar fell to 90.21 Japanese yen from 90.35 late Monday in New York.

In other Nymex trading, heating oil fell 2.75 cents to $2.0185 a gallon. Gasoline for December delivery dropped 2.22 cents to $1.9681 a gallon. Natural gas for December delivery lost 3.4 cents to $4.79 per 1,000 cubic feet.

In London, Brent crude for December delivery fell 88 cents to $75.67 on the ICE Futures exchange.

Associated Press writer Alex Kennedy in Singapore contributed to this report.