OIL prices fell yesterday, 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.

Brent North Sea crude for December lost 17 cents to $78.75 in late morning London trade.

New York's main contract, light sweet crude for delivery in December, shed 27 cents to $80.23 a barrel.

The New York contracts had Wednesday hit $82, last seen October 14, 2008, on the back of a slumping US currency.

However, the oil market lost ground on Friday amid modest profit taking and as the US dollar strengthened.

"The market had run out of steam after an impressive rally at the start of last week," said VTB Capital analyst Andrey Kryuchenkov.

Meanwhile, 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" which would ease supply worries.

"Last week's announcement by the Nigerian government that it is willing to give 10 per cent 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 yesterday, a day after twin suicide vehicle bombs blamed on Al-Qaeda killed around 100 people and blasted government offices in Baghdad.

Before the weekend, oil market sentiment was dampened by surprising data showing Britain still mired in a deep recession in the third quarter, confounding forecasts for a return to growth after five negative quarters.

Britain had been expected to follow France and Germany out of recession after they posted growth in the second quarter but the country now looks to be in deep trouble, having to face a soari