The commodity entered a bull market last week — after rising more than 20 percent from recent lows below $40 a barrel — on hopes producers will take action to ease the supply glut.
But gains were chipped in Asia after Bloomberg News reported that Iraq, OPEC’s second-biggest producer, will increase exports by about five percent after an agreement to resume shipments from three oil fields.
US benchmark West Texas Intermediate was down 97 cents, or 2.0 percent, at $47.55 a barrel. Brent fell 98 cents, or 1.93 percent, to $49.90.
Analysts said a stronger dollar ahead of the Fed’s annual symposium of global central bankers from Thursday in Jackson Hole, Wyoming, also dented demand as it makes oil more expensive for holders of other currencies.
Fed chair Janet Yellen will address the conference Friday, with investors focusing on what she has to say about its plans for monetary policy.
Talk of a fresh rate rise were fanned at the weekend by Fed vice chairman Stanley Fischer who said Sunday the US economy was picking up and meeting all the bank’s targets.
The greenback rose against the yen, euro, pound and higher-yielding currencies Monday.
“Oil is buffeted by US dollar gains and news that Iraq plans to boost its exports, stoking fears that the supply glut will worsen,” said Bernard Aw, an analyst with IG Markets in Singapore.
“Fresh developments about an OPEC discussion on a possible output freeze next month could provide a base for oil prices,” he told AFP.
Both main contracts surged last week as it emerged that the OPEC producers club and its rivals will meet next month, with speculation they could discuss ways to tackle an oversupplied market.
However, despite the rally in oil prices there are doubts a deal to freeze output would be reached.
“The stars remain misaligned for an OPEC/non-OPEC freeze agreement, but it is beneficial for producers to talk,” British bank Barclays said in a market analysis.
“Oil prices will likely experience another short-term dip in the coming weeks, in our view, before more sustainably moving to average $50” in the fourth quarter.