Brent crude futures fell 74 cents, or 0.9%, to $85.65 a barrel by 0400 GMT after a 2.2% gain on Friday. U.S. West Texas Intermediate crude was at $78.99 a barrel, down 73 cents, or 0.9%, after rising 2.1% in the previous session.
"Crude prices are softening as energy traders anticipate a potentially weakening crude demand outlook as a pivotal inflation report could force the Fed to tighten policy much more aggressively," said Edward Moya, senior analyst at OANDA, referring to U.S. consumer price data due on Feb. 14.
"This week could deliver a make or break moment in how bad of a recession Wall Street prices in."
The U.S. Federal Reserve has been raising interest rates to rein in inflation, leading to concerns that the move would slow economic activity and demand for oil.
Additionally, the resumption of Azerbaijani oil exports on Sunday at Turkey's Ceyhan terminal also relieved supply concerns, said analyst Tina Teng at CMC Markets.
The terminal had been damaged in the devastating earthquakes that hit Turkey and Syria last week. It is the storage and loading point for pipelines which carry oil from Azerbaijan and Iraq.
Oil prices had gained on Friday after Russia, the world's third largest oil producer, said it would cut crude production in March by 500,000 barrels per day (bpd), or about 5% of output, in retaliation against western curbs on its exports that were imposed in response to the Ukraine conflict.
On a weekly basis, both the Brent and WTI contracts rose more than 8% last week, buoyed by optimism over demand recovery in China, the world's top crude importer and No. 2 oil consumer, after COVID curbs were scrapped in December.
China's oil demand recovery is curbing its gasoline exports in February although its refiners are maintaining diesel shipments at above 2 million tonnes.
Stefano Grasso, a senior portfolio manager at 8VantEdge in Singapore, said the 500,000 bpd cut would bring Russia back in line with its OPEC+ quota as Moscow is currently over-exporting.
The Organization of the Petroleum Exporting Countries (OPEC) and their allies including Russia, a group known as OPEC+, in October agreed to cut production by 2 million bpd, about 2% of world demand.
Oil prices may resume their rally back to $100 a barrel later this year on China's demand recovery and limited supply growth due to a lack of investment, OPEC country officials told Reuters.
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