Crude oil prices dipped early on Monday on expectations Opec output would remain high after rising in May, stoking worries of oversupply despite declining US rig operations.

Crude oil prices jumped almost 5 per cent on Friday, their biggest rally in over a month, as a bigger than expected drop in US oil rigs in operation set off a renewed rush of bullish bets.

But prices eased on Monday due to near-record production in most oil-producing regions, especially the Middle East.

Front-month Brent crude futures had fallen 51 cents to $65.05 per barrel at 0129 GMT on Monday. US crude futures were down 52 cents at $59.78 a barrel.

Oil output by the Organization of the Petroleum Exporting Countries (Opec) likely hit a two-and-a-half year high of 31.22 million barrels per day (bpd) in May and production is not expected to be cut during a meeting of the group this Friday.

US bank Morgan Stanley said that prices could fall in the second half of the year, although it said it was unlikely they would drop back to their six-year lows from January.

"We have growing concerns about crude fundamentals and prices in 2H15 and 2016 after the quick recovery (since January) ... The market appears complacent about rising Opec production and upcoming Iran discussions, both of which could more than offset US declines," Morgan Stanley said on Monday.

"That said, retesting YTD (year-to-date) lows is very unlikely. Healthy transport demand, reflected in strong refining margins, capex cuts and low spare capacity should limit downside." – Reuters