Oil prices fell as much as 2 percent on Monday after Iraq said it wanted to be exempt from an OPEC production cut, though prices drew some support from a rally in Wall Street shares and a draw in crude inventories at the U.S. storage hub of Cushing, Oklahoma.
U.S. West Texas Intermediate (WTI) crude settled down 33 cents, or 0.7 percent, to $50.52. Brent crude futures were down 30 cents, or 0.6 percent, at $51.48 a barrel by 2:42 p.m. ET (1842 GMT).
The Organization of the Petroleum Exporting Countries (OPEC) announced plans last month to cut output to boost prices, but has not yet given details on how it will reach the target. The group will iron out the details of how it will hit the target at its next meeting in Vienna on Nov. 30.
Iraqi oil minister Jabar Ali al-Luaibi said on Sunday the country, second largest producer in OPEC, wanted to be exempt from output curbs as it needed more money to fight Islamic State militants.
"This just casts one more spotlight onto potential uncertainty ahead of this meeting," said Matt Smith, director of commodity research at energy data provider ClipperData.
Falah al-Amiri, head of Iraqi state oil marketer SOMO, added that Iraq's market share had been compromised by the wars it has fought since the 1980s. "We should be producing 9 million (barrels per day) if it wasn't for the wars," he said.
Iraq said it could raise output slightly this month from September's 4.774 million bpd.
Losses were limited as a flurry of deal activity boosted stock prices on Wall Street and as data by energy monitoring firm Genscape showed a draw of about 1 million barrels of crude at the Cushing, Oklahoma delivery hub for WTI during the week to Oct. 21.
Comments from Iran's deputy oil minister Amir Hossein Zamaninia also helped limit losses in oil earlier.
Zamaninia said Tehran would encourage other OPEC members to join an output freeze, adding that $55-$60 a barrel was a fair price to bring stability to the market. Oil was trading above $100 a barrel in mid-2014 before a crude glut forced it lower.
Russia, the world's No. 3 oil producer which is not a part of OPEC, was confident of reaching a deal with the group to support the market, said Russian Energy Minister Alexander Novak, who has been holding talks with Saudi and other OPEC officials.
After a meeting with OPEC Secretary-General Mohammed Barkindo, Novak said that they had discussed specific mechanisms of a possible deal between Russia and OPEC. Options other than output freeze were considered as well.
Novak also told Russia's Interfax news agency OPEC had invited other non-OPEC countries to attend its annual meeting on Nov. 30, according to Dow Jones.
OPEC is aiming to reduce output to between 32.5 million barrels per day (bpd) and 33 million bpd, from September's 33.39 million bpd.
"A decision to cut to 33 million bpd should keep the crude price basis Brent in the $50-$60 band, not least because it shows that Saudi policy has changed, that OPEC is serious and can rise above political disagreements," David Hufton, of consultancy PVM, said in a note.
Analysts said that oil markets, which have been dogged by two years of oversupply, might be rebalancing in terms of production and consumption.
"The market moved into a small deficit in Q3, will remain so in Q4 and then the deficit will expand significantly in 2017," Barclays bank said in a note to clients.
— CNBC's Tom DiChristopher contributed to this report.