Oil fell to near $81 on Tuesday, extending losses seen in the previous session, as the dollar gained against the euro on fears that Ireland's debt crisis may spread in the euro zone.
The euro fell to as low as $1.3548, coming under renewed pressure as political uncertainty in Ireland and worries about other heavily-indebted members of the 16-nation bloc snuffed out initial optimism over a bailout plan for Dublin.
U.S. crude for January shed 60 cents to $81.14 a barrel at 0521 GMT, after dropping 24 cents on Monday. Oil hit a high of $82.10 earlier. ICE Brent was down 73 cents to $83.23 a barrel.
According to market analyst Wang Tao, U.S. oil is technically neutral, with prices trapped within a narrow range of $80.50-$82.87 per barrel.
"Further oil market volatility cannot be excluded as Irish domestic political developments may yet slow the negotiation of the aid package with the EU/IMF, and that attention will at some point shift its focus to other euro zone economies," JP Morgan analysts said in a note.
"Looking forward over the course of the week, there appears to be little macroeconomic news to drive sentiment, apart from the repercussions of the Irish settlement."
Irish Prime Minister Brian Cowen defied mounting pressure to quit on Monday, saying he would stay in office until parliament passed an austerity budget needed to secure the IMF/EU bailout, which could total 80 billion to 90 billion euros, and then call an early election.
The dollar index , which measures the greenback against a basket of currencies, gained 0.15 percent amid the Irish debt gloom on Tuesday.
"Oil traders had gotten back into the habit of taking their cues on oil trading from the dollar and from equities," Peter Beutel, president of U.S. trading advisory Cameron Hanover said in a note.
However, hopes of a drawdown in U.S. crude stocks in the week to Nov 19, reflecting better demand at the world's top energy consumer, may support prices.
Data from the United States is expected to show a third week of decline for crude inventories in the week to Nov. 19 following a surprise heavy drawdown in the previous week, a poll showed on Monday.
"Seasonally demand (in the U.S.) should be improving in this quarter of the year. Inventories are coming off, especially for distillates," Serene Lim, a Singapore-based oil analyst at ANZ.
