By Moming Zhou & Polya Lesova, MarketWatch NEW YORK (MarketWatch) -- Oil futures fell on Tuesday, giving back some of the previous session's gains, as the dollar rebounded on data showing a big drop in a key U.S. price index. Investors are also awaiting an industry group to report last week's petroleum data. The U.S. government reported producer prices rose 0.3% in October, less than forecast. Excluding food and energy, prices unexpectedly dropped by the most in three years. Read Economic Report on PPI index. Crude oil for December delivery was last down 16 cents, or 0.2%, at $78.74 a barrel in North American electronic trading. The contract rose more than 3% Monday as the dollar weakened. "A slight strengthening in the dollar is forcing a modest retracement" in crude prices, wrote Edward Meir, analyst at MF Global, in a note to clients. However, the dollar could weaken again, he added, ensuring that commodities will push higher. In currencies trading, the dollar rebounded on Tuesday after the previous session's sharp drop. The euro fell 0.4% to $1.4885. The greenback, as gauged by the dollar index (DXY 75.28, +0.45, +0.60%) , had fallen to its lowest level since August 2008 on Monday. Read more on currencies. Oil is denominated in U.S. dollars, so a weaker dollar makes the commodity less expensive for investors holding other currencies. Later Tuesday, analysts are expecting the American Petroleum Institute will report U.S. crude inventories rose 1.2 million barrels last week, according to a survey by Platt's. Analysts polled by Platts also project an increase of 950,000 barrels in gasoline inventories and a decline of 700,000 barrels in distillate supplies. The Energy Information Administration will report its more closely watched data at 10:30 a.m. on Wednesday.

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