Oil fell nearly 2 percent a barrel on Monday, extending its retreat from a near eight-month high as the dollar firmed and stock markets tumbled.
U.S. crude settled down $1.42 at $70.62, after optimistic signs of an economic recovery that could bolster flagging fuel demand sent crude above $73 a barrel last week.
Brent crude for July, which expired on Monday, settled down $1.48 at $69.44 a barrel.
Gains in the dollar, which makes oil more expensive for holders of other currencies, helped pressure prices.
The slumping factory sector in New York state shrank at a more severe rate than in May, the New York federal Reserve said on Monday, another cautionary note for the markets.
The dollar started the early rout for crude futures, followed by the Fed's report of weaker New York state business conditions, said Phil Flynn, analyst at Alaron Trading in Chicago.
Oil has risen from around $51 at the end of April to hit near eight-month highs on Thursday on economic optimism, stirring concerns that speculation in the market has pushed oil up too high too fast.
French Economy Minister Christine Lagarde said G8 ministers want measures to curb volatility in oil markets, which put at risk growing signs that their economies are heading toward recovery.
OPEC Secretary General Abdullah al-Badri said that a too-quick rise in oil prices could harm a global economic recovery, though he said a price of $80 a barrel would not stem growth.
Of course we do not want to see oil prices rising too rapidly and certainly not to harm growth in the global economy, al-Badri said in an email response to questions. We need a stable oil price.
The head of the International Monetary Fund, Dominique Strauss-Kahn, also sounded a cautious tone on Monday, saying the worst of the global crisis was not yet over.
Traders were also keeping a close eye on post-election political turmoil in OPEC nation Iran. Armed men fired on a rally supporting defeated presidential candidate Mirhossein Mousavi on Monday, killing one and wounding many, a witness said.
Certainly the events in Iran could postpone a correction if they take a turn for the worse, said Edward Meir from MF Global.
In Nigeria, the main militant group said on Monday it had sabotaged an oil pumping station in the Niger Delta operated by Chevron Corp
In a preliminary Reuters poll ahead of weekly U.S. government inventory data on Wednesday, analysts expected a 1.8 million-barrel fall in crude oil inventories, a 600,000-barrel rise in gasoline stocks while distillate stocks likely added 900,000 barrels.
(Additional reporting by Gene Ramos and Robert Gibbons in New York, Alex Lawler in London, Chua Baizhen in Singapore; Editing by Lisa Shumaker)