Oil fell more than $2 on Monday, hovering below $80 a barrel as the U.S dollar recovered from recent lows and fears that the current credit crunch could slow demand for oil.

U.S. WTI crude fell $2.16 to $79.06 a barrel by 11:50 a.m. EDT, extending losses from its previous session. London Brent crude was $2.12 lower at $76.78.

Oil rose to a record high of $83.90 a barrel on September 20, helped partly by the slumping dollar, but has since lost ground as concerns about the impact of the credit squeeze triggered by the U.S. subprime mortgage crisis spread.

The dollar rose 0.7 percent to $1.4038 per euro at 1:27 p.m. in New York. It has climbed 1.7 percent since falling to an all- time low of $1.4283 on Oct. 1, according to Bloomberg data.

Members of the Organization of Petroleum Exporting Countries have said a falling dollar justified higher prices because oil- producing countries sell crude oil in dollars and often buy goods in euros.

In U.S. dollars, West Texas Intermediate, the New York- traded crude-oil benchmark, is up 29 percent so far this year. Oil is up 21 percent in euros, 24 percent in British pounds and 28 percent in yen.

Investment bank Goldman Sachs last month forecast oil prices could surge to $95 by the end of 2008 and estimated the average price next year at $85 a barrel.

In a bid to ease prices which leapt to a record $83.90 last month, the Organization of the Petroleum Exporting Countries (OPEC) agreed to raise output by 500,000 barrels per day from November 1.