Lagos — Oil prices on Tuesday reversed a two-day rally and fell sharply to $81 a barrel before the end of the day's transactions. The price dip was driven by a stronger dollar, a lacklustre stock market and rising crude supplies.
Benchmark crude for April delivery fell 81 cents to $81.06 per barrel on the New York Mercantile Exchange. Earlier, oil dropped as low as $80.16. Crude has risen steadily over the last two trading sessions and has gained 18 percent over the past month amid signs the U.S. economy is emerging from last year's recession.
Those gains were trimmed Tuesday as news from Europe and China bolstered the dollar, making crude more expensive for investors holding foreign currencies.
Tradition Energy analyst Addison Armstrong said the dollar strengthened against the euro ahead of talks between President Barack Obama and the Prime Minister of Greece, which has been reeling from financial turmoil.
Meanwhile, Nigeria may seek to increase its OPEC oil production quota if output remains free from militant disruption, an official from the Nigerian National Petroleum Corporation (NNPC), said on Tuesday.
Attacks by armed groups in the Niger Delta, home to Africa's largest oil and gas industry, cut more than 25 per cent of Nigeria's crude production in the four years through 2009.
Output has recovered after a government amnesty programme last year prompted thousands of fighters to disarm.
Crude oil production has averaged 1.5 million to 1.7 million barrels a day this year, Austen Oniwon, group executive director for refining and petrochemicals at NNPC said in an interview in Cape Town on Tuesday.
The country is producing 2.3 million barrels a day of crude and condensate combined, he said.
"If the amnesty prevails and there's no disruption, we intend to sustain that and probably make a case to OPEC to increase the limit," Oniwon said.
Nigeria's production limit as a member of the Organization of Petroleum Exporting Countries is about 1.67 million barrels of crude oil a day. Output has risen from a low of 1.75 million barrels a day in July last year to around 1.94 million barrels a day in February, according to Bloomberg estimates.
Separately, NNPC may list on a stock exchange within 30 months of a new petroleum industry bill being approved, Oniwon said.
NNPC hopes the Petroleum Industry Bill, which seeks to consolidate and modernize bills made over the past 40 years, will be reviewed before the middle of the year, he said.