Oil retreated after its biggest gain in more than five weeks as Europe's largest oilfield gradually restarted following a power outage.

Brent futures traded near $73 a barrel as Equinor ASA restored production at the Johan Sverdrup oil field in the North Sea to two-thirds of capacity after yesterday's halt. Crude had surged 3.2% on Monday as the dollar weakened, making commodities more attractive to investors. 

Traders are also tracking the latest geopolitical tensions. Ukrainian armed forces carried out their first strike in a border region within Russian territory with a ATACMS missile, RBC Ukraine reported. President Vladimir Putin pushed ahead with a pledge to update Russia's nuclear doctrine to expand the conditions for using atomic weapons, in a warning to the US.

Oil is still lower for the year as concerns around Chinese demand and plentiful global supply weigh on the outlook. The prompt spread for WTI — the difference between the two nearest futures contracts — traded in a bearish contango structure on Monday for the first time since February. 

The International Energy Agency has forecast a potential surplus of more than 1 million barrels a day next year as Chinese demand continues to falter, which could be even bigger if OPEC+ decides to revive output.

"We remain bearish on oil in the mid- to long-term," said Zhou Mi, an analyst at the Chaos Research Institute in Shanghai. "OPEC+'s planned output increases and China's demand peaking" raises the prospect for a global glut, he added.

In the Middle East, Lebanon and the Hezbollah militia have agreed to a US proposal for a cease-fire with Israel, according to a report from Reuters on Monday, which cited a top Lebanese official. A US official cautioned that negotiations were ongoing.

Brent for January settlement was 0.4% lower at $73.04 a barrel as of 10:08 a.m. in London.

WTI for December delivery, which expires Wednesday, dipped 0.5% to $68.80 a barrel.

Source : Bloomberg