July 26 (Bloomberg) -- Crude oil fluctuated near $79 a barrel as sales of new U.S. homes rose more than forecast and Tropical Storm Bonnie dissipated without damaging production platforms and refineries. Oil gained as much as 0.4 percent as equities advanced after the Commerce Department said purchases climbed 24 percent in May to an annual pace of 330,000. The jump followed a May slump triggered by the end of a government tax credit. Oilfield workers returned to the Gulf after evacuating for Bonnie. "We had a housing number this morning that wasn't as bad as some guys have been looking for, and that was somewhat bullish for equities, which dragged oil up," said Rich Ilczyszyn, a senior market analyst with broker Lind-Waldock in Chicago. "We sold off pretty good overnight as the storm turned into nothing." Oil for September delivery fell 10 cents to $78.88 a barrel at 10:43 a.m. on the New York Mercantile Exchange. Prices have dropped 0.6 percent this year. Oil settled at $79.30 a barrel on July 22, the highest level since May 5. The Standard & Poor's 500 Index rose 0.5 percent to 1,108.21. The Dow Jones Industrial Average rose 44.20 points, or 0.4 percent, to 10,468.82. The dollar weakened for a third day against the euro, boosting the appeal of commodities as an alternative investment. The euro increased 0.2 percent to $1.2932 from $1.2909 July 23. Earlier, crude declined to $78.06 after Bonnie degenerated. BP Plc vessels returned to the U.S. Gulf to permanently plug a damaged well, the source of the largest oil spill in U.S. history. "You're definitely seeing a move back after the storm fears," said Carl Larry, president of Oil Outlooks and Opinions LLC in Houston. "We're trying to find a place to settle in at after we get that out of the way," Brent crude for September settlement on London's ICE Futures Europe exchange fell 12 cents to $77.33 a barrel. --With assistance from Grant Smith in London. Editors: Richard Stubbe, Charlotte Porter.

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