NEW YORK (Reuters) - Oil fell in choppy trade on Monday as investors sold off a rally above $80 a barrel and the dollar strengthened against the euro.

Crude had risen earlier on Monday but lost steam above $80, near the top of a range that has been in place over the past few months.

The euro fell against the dollar on Monday as uncertainty remained over a bailout package for debt-strapped Greece, adding pressure to crude prices. <USD/>

U.S. crude for April delivery fell $1.33 to $78.33 a barrel by 1:47 p.m. EST (1847 GMT), after climbing as much as 96 cents earlier. On Friday, the contract settled up $1.49 at $79.66 and posted its biggest monthly percentage gain since May 2009.

London Brent crude fell $1.07 to $76.52.

“We’re seeing some reallocation to short positions and the euro’s weakness also was part of it and after the strong February you had the failure to push above $81,” said Richard Ilczyszyn senior market strategist at Lind-Waldock in Chicago.

Prices have traded in a range between $69 and $84 a barrel since last October, but $80 a barrel is being reinforced as a key resistance level, analysts said.

A man refuels his car at a petrol station in Sydney October 26, 2009. REUTERS/Daniel Munoz

Investors have looked to wider economic data over the past year for signs of economic recovery and a potential rebound in energy demand.

The U.S. manufacturing sector grew in February but at a slower rate than expected, according to an industry report released on Monday.

The Institute for Supply Management (ISM) said its index of national factory activity declined to 56.5 in February from 58.4 in January. The median forecast of 80 economists surveyed by Reuters was for a reading of 57.5.

The rise in the dollar against the euro helped pressure crude. Oil prices have often fallen this year when the dollar firms, making crude more costly for holders of other currencies. A stronger dollar can also signal investors plowing funds into safe havens and away from assets considered more risky, including commodities.

COPPER COMMODITY

Oil rallied earlier on a combination of bullish sentiment and a rise in the price of copper futures following a massive earthquake on Saturday in Chile, the top producer of the industrially indispensable metal.

Chile’s state energy company ENAP said it was boosting diesel imports after two of its oil refineries -- Aconcagua and Bio Bio with a combined capacity of 220,000 barrels per day -- were damaged in Saturday’s quake.

On Sunday a senior military official from Iran, the world’s fourth-largest exporter of crude, said the country could make European nations suffer by cutting off energy supplies and could target any adversary with its missiles.

Iran is disputing its nuclear energy program with the United States and its allies, who say it is aimed at developing weapons. Tehran says it is only interested in power generation and medical research.

Oil traders will look to economic reports this week, with key focus on U.S. jobless data on Friday, that should give more clues on consumer spending, and U.S. home loans on Wednesday.

The U.S. Energy Information Administration will release its weekly crude inventory report on Wednesday. According to a preliminary Reuters poll of analysts, crude stocks rose by 1.3 million barrels last week, while distillate stocks fell by 600,000 barrels and gasoline stocks rose by 400,000 barrels.