Benchmark crude for July delivery fell $2.25 to $67.30 a barrel by afternoon in Europe in electronic trading on the New York Mercantile Exchange. On Friday, it dropped $1.82 to settle at $69.55.
The July contract expires later Monday. The August contract dropped $2.19 to $67.83.
Crude rose to an eight-month intraday high of $73.23 a barrel earlier this month on investor optimism that the U.S. economy, suffering through its worst recession in decades, may grow by the end of the year.
However, recent economic data has been mixed and reflects an economy still struggling to right itself. The Dow Jones industrial average fell 3 percent last week.
"Oil may have peaked in the short-term," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "The market is overripe for a correction. Eventually the laws of supply and demand will re-exert themselves."
In its report on the global economy, the World Bank also said it expected global trade to plunge by 9.7 percent this year.
"The global recession has deepened," the bank said, adding that economic damage to developing countries "has been much deeper and broader than previous crises."
Also weighing on prices were the dollar's gains against the euro, as the political unrest in Iran seemed to attract investors into the safe haven of the U.S. currency, which typically trades inversely to commodities like oil and gold.
The euro was trading at $1.3836 on Monday, down from $1.3958 late Friday in New York.
This week, traders will be looking for signals on consumer demand in a Commerce Department report on May personal spending, which has fallen for eight of the past 10 months. The University of Michigan also reports on June consumer sentiment.
On Sunday, militants of the Movement for the Emancipation of the Niger Delta said they attacked two pipelines belonging to oil giant Royal Dutch Shell in south Nigeria.
Violence has been escalating in the region as the military intensifies operations to flush out rebels battling for a larger share of the country's oil revenues.
"The recent attacks haven't had much of an impact on oil because there's a lot of global spare production capacity," Shum said. "Oil is everywhere."
Analysts said events in Iran, where a disputed presidential election has led to massive protests and bloody crackdowns, had not affected prices so far.
"A year ago the political turmoil in Iran would have sent oil prices through the roof ... but these days markets are calmer," said KBC Market Services in Britain. "This is a situation that needs to be watched closely as Iran exports about 2.2 million barrels a day of crude oil to some significant places - Japan and China stand out."
In other Nymex trading, gasoline for July delivery was down 7.43 cents at $1.8501 a gallon and heating oil lost 5.41 cents to $1.7326 a gallon. Natural gas for July delivery fell 14.2 cents to $4.051 per 1,000 cubic feet.
In London, Brent prices fell $1.31 to $67.88 a barrel on the ICE Futures exchange.
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