By Amanda Cooper
LONDON (Reuters) - Oil declined on Monday, surrendering early gains, although the prospect of an easing in trade tensions between the United States and China helped stem losses.
Brent crude futures were down 35 cents at $78.16 a barrel by 1214 GMT, having retreated from a session high of $79.19. U.S. crude futures were down 2 cents at $71.26.
"Oil prices are finely balanced in today's trading session. Ramping up of oil production in the U.S. and concerns surrounding high oil prices impacting demand are weighing," said Abhishek Kumar, senior analyst at Interfax Energy's Global Gas Analytics.
"Nevertheless, signs of receding trade tensions between the U.S. and China, together with ongoing geopolitical tensions in the Middle East and Venezuela's deteriorating economic scenario, are limiting losses."
A possible U.S. trade war with China is "on hold" after the world's two largest economies agreed to drop their tariff threats while they work on a wider trade agreement, U.S. Treasury Secretary Steven Mnuchin said on Sunday, giving global markets a lift in early Monday trade.
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The energy ministers of Saudi Arabia and the United Arab Emirates last week voiced concern about recent oil market volatility and plan to meet Russian counterpart Alexander Novak in St Petersburg to continue consultations.
"It's worth watching St Petersburg at the end of this week. That could provide the key input for the next few weeks," Petromatrix strategist Olivier Jakob said.
BP Chief Executive Bob Dudley told Reuters he expected a flood of U.S. shale and a possible reopening of OPEC taps to cool oil markets after crude rose above $80 a barrel last week.
Dudley said he saw oil prices falling to between $50 and $65 a barrel due to surging shale output and OPEC's capacity to boost production to cover a potential shortfall in Iranian supplies due to sanctions.
Venezuela's socialist leader Nicolas Maduro faced fresh international censure on Monday after re-election in a vote foes denounced as a farce cementing autocracy.
The United States is actively considering oil sanctions on OPEC member Venezuela, which has seen output fall by a third in two years to its lowest in decades.
"The spectre of U.S. oil sanctions on the embattled Latin American producer now looms large as Washington strives to tighten the financial noose," PVM Oil Associates strategist Stephen Brennock said in a note.
Fund managers cut their holdings of U.S. crude to the lowest level this year, according to data from the U.S. Commodity Futures Trading Commission on Friday.
(Editing by Dale Hudson)