Oil fell for the third day to below $80 a barrel on Monday, as investors continued to take profit from last week's one-year high on renewed concerns about the strength of the global economy.
Weak U.S. industrial sector earnings last week pushed down stock markets and underscored concerns about the pace of the U.S. economic recovery and its impact on energy demand.
U.S. crude for December delivery fell 51 cents to $79.98 by 0706 GMT (3:06 a.m. EDT), after having earlier fallen as low as $79.57.
London Brent crude fell 41 cents to $78.51.
Asian speculators are cutting their positions after the fall on Wall Street last week. But a rebound in the Dow Jones futures this morning has helped limit the drop in oil prices, said Ryuichi Sato, an analyst at Mizuho Corporate Bank.
The market is cautious about pushing oil prices higher because the demand fundamentals are still weak and the world economy is still fragile.
Comments from producer group OPEC last week that it would raise output targets at a December meeting has also cast a pall on the oil market, analysts said.
Stock bulls may hit the pause button again this week if a wave of earnings due from marquee names such as Exxon Mobil and a slew of economic data offer no new incentives to extend Wall Street's seven-month rally.
Even though the profits that have come in so far have proven to be surprisingly strong, U.S. stocks have made very little headway, as investors search for more definitive signs the economic recovery is gaining strength.
The dollar fell to a 14-month low against the euro on Monday as a Chinese report saying Beijing should increase its holdings of euros and yen in its foreign reserves led investors to sell the greenback.
China was again the bright spot for the global economic outlook, following comments by Vice Premier Li Keqiang that the country's economic recovery has consolidated after having performed better than expected, while Vice Finance Minister Wang Jun said China's economic growth is likely to accelerate this quarter.
Its strong economic growth was reflected in a 12.5 percent year on year jump in implied oil demand, the sixth rise in a row and first double-digit growth since August 2006.
Money managers hiked net long crude oil positions on the New York Mercantile Exchange in the week to October 20, the Commodity Futures Trading Commission said in a report on Friday.
Open interest positions remained bulked at the NYMEX December crude oil $85 and $90 call options, according to Reuters data on Friday, after crude futures prices moved above $80 a barrel this week.