Oil prices have more than doubled since March in part on expectations that massive U.S. fiscal and monetary stimulus will hasten a decline of the dollar. Investors often buy crude and other commodities as a hedge against the risk of inflation posed by a weaker dollar.
The euro fell to $1.3871 on Monday from $1.4015 on Friday, while the British pound was down to $1.6334 from $1.6450, after Russian finance chief Alexei Kudrin said this weekend that the dollar's status as the world's main reserve currency was unlikely to change in the near term.
Traders are also wary that the recent price run-up isn't supported by improving supply and demand fundamentals.
"There's more talk in the market of expectations of a pullback in oil," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. "It's rallied too much in too short a period of time."
"Oil is still very strong given the weak overall fundamentals," he said.
On Friday, the Organization of Petroleum Exporting Countries dropped its daily demand forecast for 2009 by 230,000 barrels, estimating that global consumption would shrink to 83.8 million barrels a day.
At the same time, some analysts were heartened by the International Energy Agency's Thursday report, which forecast a slightly less severe cut in global demand, making an upward revision of 120,000 barrels a day to total daily demand of 83.3 million barrels.
"This may seem a small change to you but it could be the first sign that the doom-mongers have overdone it as far as demand is concerned," said KBC Market Services in London.
Nigerian militants said Saturday they had sabotaged a pipeline, run by Chevron Corp.'s local subsidiary, in the restive southern Niger Delta region.
Violence has been escalating in the region as the military intensifies operations to flush out rebels battling for a larger share of the country's oil revenues.
In other Nymex trading, gasoline for July delivery fell 1.6 cents to $2.0271 a gallon and heating oil dropped 0.79 cent to $1.8296. Natural gas for July delivery slid 3.1 cents to $3.826 per 1,000 cubic feet.
In London, Brent prices fell 82 cents to $70.10 a barrel on the ICE Futures exchange.
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Associated Press writer Alex Kennedy in Singapore contributed to this report.
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