Oil prices fell on Monday after closing the previous session at their lowest levels since March on renewed oversupply concerns from the United States and Iraq, although a weaker dollar helped to limit deeper losses.

Investors are looking to the US Federal Reserve for direction this week. The central bank starts a two-day policy meeting on Tuesday that could result in a September interest rate hike that would strengthen the greenback.

"The markets are looking for price guidance from Janet & Co," said Ben Le Brun, market analyst at Sydney's OptionsXpress, referring to Fed Chair Janet Yellen and the bank.

"There is scope for the dollar bulls to be disappointed this week (which) might be a driver for oil prices and the commodities complex overall," Le Brun said.

A weaker dollar makes dollar-denominated commodities, including oil, cheaper for consumers using other currencies.

Brent crude for September fell 6 cents to $54.56 a barrel as of 0340 GMT after dropping 65 cents in the previous session to $54.62, its lowest close since March 19.

US crude for September was down 12 cents at $48.02, after briefly dropping below $48 a barrel. US oil fell 31 cents in the previous session to $48.14, its lowest settlement since March 31.

Sparking new worries about a global glut, US oil producers added 21 drilling rigs last week, the biggest rise since April 2014, according to Baker Hughes.

The increase in drilling activity came despite a 21 per cent collapse in US crude prices from about $61 a barrel in mid-June. A 20 per cent downturn is considered by many traders to constitute a bear market.

In Iraq, exports from its southern oilfields are on course for a new monthly record, having topped 3 million barrels per day so far this month, according to loading data and an industry source.

The expectation of continued abundant oil supplies, including an output increase from Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries, led the National Australia Bank on Monday to revise its oil price forecasts in a monthly report.

"We now expect oil prices to stay below $70 a barrel for the rest of 2015 and 2016," the bank said.

Speculators cut long bets on US crude futures and options to the lowest level in five years last week, the US Commodity Futures Trading Commission said on Friday. – Reuters