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China's latest move to bolster its economy
offset some of the losses as it raised hopes that the world's
top energy consumer would help absorb supplies.
Brent crude for June was down 44 cents at $64.95 a barrel by
0915 GMT (4.15 a.m. EDT) after dropping 1.6 percent last week.
June U.S. light crude was down 35 cents to $59.04 a barrel after
rising for eight straight weeks, the longest winning stretch
since early 2013.
Analysts talk of a growing disconnect between the futures
market, which has gained more than 40 percent since its January
low, and a growing physical supply glut.
"The market is pretty much ahead of itself as the overall
outlook is still bearish," said Commerzbank analyst Eugen
Weinberg.
In a sign that the market is responding to the recent price
gains, U.S. drillers added rigs to the Permian basin for the
first time this year after weeks of idling rigs.
Overall, the number of active oil rigs declined for the 22nd
week in a row, but the rate of decline has slowed in recent
weeks.
Analysts at Morgan Stanley said growing supplies in the physical
market, signs of increasing activity in U.S. shale oil
production and potential for higher OPEC output are weighing on
the outlook.
"We have growing concerns about crude fundamentals in the second
half of 2015 and 2016," the bank said in a note to clients.
Brent's four-week advance to hit 2015 highs halted late last
week as excess European and African crude supply dragged prices
down, with a rally technically exhausted.
Investors will be looking at Wednesday's monthly report from the
International Energy Agency to see if falling oil prices have
boosted global demand for oil, Weinberg said.
China cut interest rates for the third time in six months on
Sunday to stoke its sputtering economy, which is headed for its
worst year in a quarter of century.
Data on Friday showed China ahead of the United States as the
world's top oil importer in April, as the Asian economy seized
on lower crude prices to stock up.
In Libya, oil production remained volatile after a protest
closed the Nafoura oilfield, cutting output at Libya's Arabian
Gulf Oil Co (AGOCO) by some 35,000 barrels per day.
(Additional reporting by Florence Tan in Singapore; editing by
Christopher Johnson and Jason Neely)
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