Oil rises above $80 a barrel after hurricane disrupts

U.S. crude for December delivery settled down 38 cents at $79.05 a barrel.

London Brent crude dropped 27 cents to settle at $77.50 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.

About 43 percent of U.S. production in the Gulf of Mexico and 28 percent of the region's natural gas output remained shut on Tuesday, according to government figures.

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 hit record highs last year near $150 a barrel, then sank 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 sought safer havens.