Brent crude futures was down $1.42, or 1.9%, to $73.37 a barrel by 0902 GMT. U.S. West Texas Intermediate (WTI) crude was at $68.61, down $1.56 or 2.2%, Reuters reported.

Last week both benchmarks posted a second straight weekly decline as disappointing Chinese economic data raised concerns about demand growth in the world's largest crude importer.

That helped erase a boost in prices after Saudi Arabia pledged to cut production in July by 1 million barrels per day (bpd).

"Oil prices are caught in a clash between two opposing forces, bearish asset allocators who point to monetary contraction and bullish oil speculators expecting lower inventories in 2H23," Bank of America Global Research's Francisco Blanch said in a note.

"The bearish allocators will maintain the upper hand for now, as oil prices struggle to rally until the Fed eases money supply," Blanch said. The bank still expects Brent crude to average about $80 a barrel in 2023.

The Fed's rate hikes have strengthened the greenback, making dollar-denominated commodities more expensive for holders of other currencies and weighing on prices.

Most market participants expect the U.S. central bank to leave interest rates unchanged when it concludes its two-day monetary policy meeting on Wednesday.

On the supply side, while Saudi Arabia has cut oil production four times in the past year, Russian supply has held up as sanctions were engineered in a way to have less of an impact on output, Blanch said.

Russian oil exports to China and India have grown despite the implementation of the European Union's embargo and the Group of Seven's price cap mechanism that took effect in early December.

Goldman Sachs cut its oil price forecasts on higher-than-expected supplies from Russia and Iran and raised 2024 supply forecasts for the two producers and Venezuela by a total 800,000 bpd.

The bank's December crude price forecast now stands at $86 a barrel for Brent, down from $95, and at $81 a barrel for WTI, down from $89.