Oil fell towards $68 a barrel on Monday as the easing of tensions in energy-rich Nigeria prompted some investors to take profit. Four Nigeria militant factions have accepted in principle an amnesty offer from the country's president.

The move raised hopes that Africa's top oil producer would halt a battle with rebels in its energy-rich Niger Delta that has shut in around 1 million barrels per day of output.

US crude for August delivery fell 56 cents to $68.60 a barrel by 0235 GMT. The contract fell $1.07 to settle at $69.16 a barrel on Friday.

London Brent crude was down 62 cents at $68.30.

Pipeline bombings, attacks on oil and gas installations and kidnapping of industry workers over the past three years have prevented Nigeria from pumping much above two-third of its installed oil output capacity of 3 million barrels per day.

'Tensions in Nigeria seem to have eased over the weekend so some of that supply risk premium is giving way this morning,' said Toby Hassall, an analyst at Commodities Warrants Australia.

'Beyond that, the market will be closely eyeing the raft of economic data due later this week, which will bring investors' focus back to fundamentals.'    

There is a heavy calendar of economic data for the week, including China's Purchasing Managers Index on Wednesday, US Consumer confidence on Tuesday, and a US jobs report and manufacturing data on Thursday.

For investors, the slew of US economic indicators could be the make-or-break factors in determining whether the oil market rally, which has lifted prices more than 50 percent this year on hopes of economic recovery, has any legs.

In the first big number for the week, industrial output from the world's No. 2 energy consumer Japan jumped 5.9 percent in May, the third straight month of increase after a big slump.

This adds to positive economic data on Friday. US consumer spending in May rose for the first time since February and savings hit a record high as federal stimulus measures boosted incomes.

President Barack Obama could discuss a second stimulus package to boost the economy if needed, but at the moment no more new money looked necessary, a top White House adviser said on Sunday.

Crude oil speculators on the New York Mercantile Exchange hiked their net long positions in the week to June 23, according to data from the Commodity Futures Trading Commission released on Friday. - Reuters