Brent crude futures for September fell 44 cents, or 0.6%, to $73.66 a barrel by 0432 GMT while U.S. Texas Intermediate crude was at $71.62 a barrel, down 45 cents.
Coronavirus cases continued to rise over the weekend with some countries posting record daily increases and extending lockdown measures that could slow oil demand. China, the world's largest crude importer, has also seen a rise in COVID-19 cases while the nation battled severe floods and a typhoon in central and eastern parts of the country.
Also, Beijing's crackdown on the misuse of import quotas combined with the impact of high crude prices could see China's growth in oil imports sink to the lowest in two decades in 2021, despite an expected rise in refining rates in the second half.
"The delta variant is still spreading and China has started to clamp down on teapots so their import growth would not be that much," said Avtar Sandu, a senior commodities manager at Singapore's Phillips Futures, referring to independent refiners.
He added that investors are looking ahead to the next Federal Reserve meeting and U.S. oil inventories data later this week for price direction.
However, strong U.S. demand and expectations of tight supplies are underpinning prices, enabling both contracts to recover from a 7% slump last Monday to mark their first gains in 2-3 weeks last week.
"Bargain hunters came in droves when Brent got below $70 and the economic demand for energy looks robust," Howie Lee, an economist at Singapore's OCBC Bank said.
"Demand data especially from the U.S. continues to be strong and has reduced those concerns."
Global oil markets are expected to remain in deficit despite a decision by the Organization of the Petroleum Exporting Countries and their allies to raise production through the rest of the year.
The prospect of a swift return of Iranian supplies is diminishing as talks to revive a 2015 nuclear deal have been pushed back to August. Meanwhile, the United States is considering cracking down on Iranian oil sales to China as it braces for the possibility that Tehran may not return to nuclear talks or may adopt a harder line whenever it does, a U.S. official said.
In the United States, the recovery in oil drilling has been modest as producers restrained spending. U.S. oil rigs rose by seven to 387 last week, their highest since April 2020, energy services firm Baker Hughes Co said on Friday.
