Oil prices fell Monday on profit-taking and as a ceasefire took hold in Nigeria, whose crude production has been ravaged by militant attacks in recent years, analysts said.

New York's main contract, light sweet crude for delivery in December, dived 1.30 dollars to 79.20 dollars a barrel.

Brent North Sea crude for December tumbled 1.17 dollars to 77.75 dollars in late afternoon London trade.

"Crude oil prices were lower (on Monday) after a leading Nigerian militant group announced an indefinite ceasefire which came into effect at midnight yesterday," wrote analysts at the Sucden brokerage in a research note.

"The militant group has been blamed for reducing Nigerian oil output significantly from full capacity."

Nigeria's main armed group in the oil-rich Niger Delta declared on Sunday an "indefinite ceasefire" to encourage dialogue with the government but the Abuja authorities rejected the fighters' mediation team.

The Movement for the Emancipation of the Niger Delta (MEND) said it 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 Nigeria's oil industry have helped play 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.

Analysts at JBC Energy consultancy in Vienna said that the Nigerian ceasefire was "positive news".

"Last week's announcement by the Nigerian government that it is willing to give 10 percent of the country's oil wealth to the residents of the Niger Delta appears to be paying dividends, with Nigeria's main militant group MEND announcing... it is to reinstate a previous ceasefire to engage in talks with the government," JBC analysts said.

"However, the security situation in Iraq looks increasingly uncertain following two bombings at the weekend," they noted.

"This again put into question just how much the country will be able to increase its oil output in the next few years."

Iraqi security forces were on high alert on Monday, a day after twin suicide vehicle bombs blamed on Al-Qaeda killed around 100 people and blasted government offices in Baghdad.

In earlier deals on Monday, New York crude oil had briefly bounced as high as 81.58 dollars, after the dollar hit a new 14-month low against the euro.

The European single currency soared to 1.5064 dollars in Asian trade, hitting its strongest level since August 11, 2008, on signs that China may increase its holdings of the European currency.

Last Wednesday, New York crude oil surged to 82 dollars per barrel, reaching a level last seen October 14, 2008, on the back of the tumbling greenback.

The struggling US unit tends to stimulate demand for dollar-priced oil, which becomes cheaper for foreign buyers holding stronger currencies.