Oil prices retreated below $51 a barrel on Monday, giving back some of the previous session's near 4 percent gain, on risk aversion following a deadly swine flu pandemic emerging from Mexico.
The impending release of U.S. bank stress test results, a Federal Reserve meeting and a flood of earnings due later this week also heightened investor caution.
U.S. crude oil futures for June delivery fell 69 cents to $50.86 a barrel by 2313 GMT, paring some of Friday's gains of $1.93 that brought the contract to settle at $51.55.
London Brent crude fell 52 cents to $51.15.
The swine flu in Mexico is also causing some risk aversion in the markets and is already weighing on the Dow Jones index, said Ben Wesmore, a commodities analyst at the National Australia Bank.
Investors are taking caution ahead of a flood of corporate earnings and economic data this week.
Fears of a global swine flu, which first emerged in Mexico, grew over the weekend with new infections in the United States and Canada discovered on Sunday, and as millions of Mexico hid indoors to avoid a virus that has already killed up to 81 people.
Reminiscent of the Asian bird flu earlier in the decade, a swine flu outbreak could become a major set back to the already fragile state of the world economy, research firm Informa Global Markets said in a report.
While news of the flu spreading would weigh on the market, some analysts said that at this point, news of the state of the financial system and earnings would be the main sentiment driver as information about the illness was still sparse.
World finance leaders on Saturday agreed there was a break in the clouds of the economic storm but said more measures were needed to ensure an end to the global recession, while a top U.S. official said the sense of unremitting freefall in the U.S. economy has ended.
Oil prices, which have largely stagnated around $50 a barrel for most of this month, have been tracking equities closely in recent weeks as investors look to stocks for signs of an economic recovery that could revive demand for fuel.
Gulf oil producers said on Sunday they can tolerate moderate crude prices for longer to help revive global growth, but shared a concern with consumer nations that a prolonged period of low prices could sow the seeds of a future fuel price spike.
Crude oil speculators on the New York Mercantile Exchange shifted to a net short position in the week to April 21, according to data from the U.S. Commodity Futures Trading Commission released on Friday.
(Reporting by Fayen Wong; Editing by Dhara Ranasinghe)