U.S. light crude for June delivery lost 34 cents to $69.85 a barrel by 0835 GMT, erasing gains from late Friday. London Brent crude fell 39 cents to $70.56 a barrel.

Prices are more than $5 below their record highs touched two weeks ago but up about 15 percent since the start of the year.

An Iranian official said on Monday that President Mahmoud Ahmadinejad would send a letter to his U.S. counterpart to be delivered to the Swiss Embassy in Tehran, which represents U.S. interests in Iran.

"In this letter, he has given an analysis of the current world situation, of the root of existing problems and of new ways of getting out of the current vulnerable situation in the world," government spokesman Gholamhossein Elham said.

The United States has led action against Iran's nuclear plan, which it says is aimed at building atomic weapons.

Iran, which has been reported to the U.N. Security Council and has so far been defiant to calls for it to stop work on its uranium enrichment activities, says it needs nuclear fuel for civilian use.

Analysts were cautious over the impact of the letter on oil prices.

"The news from Iran is certainly bearish, at least immediately anyway. But the extent of how bearish it is going to be depends on the content of the letter, which no one knows as yet," said Tetsu Emori, the chief commodities strategist at Mitsui Bussan Futures.

Analysts are expecting gasoline supplies in the United States to tighten ahead of the summer driving season late this month, despite a surprise stock-build last week, which helped drive down oil prices by more than 6 percent.

Geopolitical concerns and the weak U.S. dollar -- which sank to an eight-month low against the yen -- have prompted fund speculators to pile into the metals markets, sending spot gold to a fresh 25-year peak, and copper struck record highs.

International Energy Agency (IEA) director Claude Mandil said on Monday he expected oil prices to stay high for at least two to three years because of high global demand and tight supply.

"They (oil companies) have not invested enough for the last 20 years," Mandil said.

"This is a cyclical business. We had low prices in the 1990s, which was unfortunate for investment in future production. We now have accelerating investment, but that will not (see) results overnight," he told reporters in Australia.

Adding to the growing natural resource nationalism in the Andean region, Venezuela -- the world's fifth-largest oil exporter -- said it was seeking to boost royalties and income tax on four heavy oil projects that process some 620,000 barrels per day (bpd) in the Orinoco Belt.

The announcement came less than a week after Bolivia rattled markets by sending troops into oil and gas fields in a surprise nationalisation of the country's energy sector.

In Nigeria, a quarter of oil production remained shut in due to militant violence, although a major oil union on Thursday suspended a planned shutdown of the local unit of Exxon Mobil Corp. after agreeing to a deal.