NEW YORK – Oil prices fell sharply Monday amid a rebounding US dollar and on expectations of easing violence in Nigeria, whose crude production has been ravaged by militant attacks.
New York's main contract, light sweet crude for delivery in December, dived $1.82 to $78.68 a barrel, closing for the first time below $80 since nearly a week ago.
London's Brent North Sea crude for December tumbled $1.66 to $77.26.
Oil prices had climbed in recent days -- the New York contract hit $82 last Wednesday -- on the back of a falling dollar.
On Monday, the euro dipped against the dollar.
"Oil prices are settling back again as more and more market participants wonder if $80 a barrel is sustainable," said analyst Phil Flynn of PFG Best.
Last week, the OPEC cartel said that an increase in oil production may depend on whether prices remain in the range of $75 to $80 per barrel and on the pace of depletion of inventories in the United States, the world's biggest energy consumer, he said.
In earlier deals on Monday, New York crude oil had briefly bounced as high as $81.58, after the dollar hit a new 14-month low against the euro on signs that China may increase its holdings of the single European currency.
The euro soared to $1.5064 in Asian trade, hitting its strongest level since August 11, 2008, but declined to $1.4894 in late afternoon trading in London.
Traders cited an opinion piece by a Chinese central bank official in China's Financial News newspaper, arguing that Beijing should boost its holdings of euros and yen, as a factor behind the euro's current strength.
But Mike Fitzpatrick of MF Global said that any slide in oil prices should be contained amid the "weakening dollar."
Adding to Monday's bearish oil market sentiment was news that Nigeria's main armed group in the oil-rich Niger Delta had declared an indefinite ceasefire on Sunday.
Analysts at JBC Energy consultancy in Vienna said that the ceasefire was "positive news" for the market.
"The militant group has been blamed for reducing Nigerian oil output significantly from full capacity," wrote analysts at the Sucden brokerage in a research note.
The Movement for the Emancipation of the Niger Delta (MEND) said it had made its decision after the government "expressed its readiness to engage in serious and meaningful dialogue with every group or individual towards achieving a lasting peace in the Niger Delta."
MEND's attacks on the Nigerian oil industry have helped wreak havoc with oil prices on the world market and slashed the nation's output by a third since 2006. Nigeria is the world's eighth-largest oil producer.
A key demand from MEND is that local communities must benefit from the region's oil wealth.
Oil prices tumbled from historic highs of more than $147 in July 2008 to about $32 in December because of the global recession but have since risen on hopes of recovery.
