Oil fell for a third day and extended losses post-settlement on Monday, reversing early gains from a relief rally on the rescue package for Spain's banks, as investors worried that other euro zone countries also will need assistance.

Also pressuring oil prices, top-exporter Saudi Arabia said OPEC may need to raise output targets at its Thursday meeting in Vienna.

With Brent crude down sharply from a 2012 peak above $128 a barrel in March, the Saudi position puts OPEC's top producer at odds with other members that favor reduced production to stem a supply glut.

In early trade, crude futures rallied more than $2 on the news that euro zone finance ministers on Saturday agreed to lend Spain up to 100 billion euros ($125 billion) to tackle the problems of debt-stricken banks.

But oil faded, the euro erased gains against the dollar and U.S. stocks fell on Wall Street as investors fretted over its impact on public debt and whether Greece's elections on Sunday will deepen the region's crisis.

"While avoiding bank failures in Spain is a good thing, investors realize that the Italians will probably want help next, so it's not a surprise for crude to pull back," said Phil Flynn, an analyst at Price Futures Group in Chicago.

Brent July crude fell $1.47 to settle at $98 a barrel, after reaching $102.21. Prices fell below $97 a barrel in post-settlement trading.

U.S. July crude slumped $1.40 to settle at $82.70 a barrel, after retreating from the $86.64 intraday peak.

Total Brent trading volume outpaced U.S. crude turnover and both had dealings above their respective 30-day averages.

U.S. RBOB gasoline and heating oil futures settled lower, but losses were limited by news that a recently commissioned 325,000 barrel-per-day (bpd) crude unit at Motiva Enterprises' Port Arthur, Texas, refinery was expected to be shut for up to five months.

Crude prices received support from data showing China's crude imports rose to a record 25.48 million tonnes, or about 6 million bpd in May, up 18.2 percent from a year ago.

But implied oil demand edged up only 0.4 percent in May from year ago and only marginally from April.

Other data showed China's inflation, industrial output and retail sales all declined in May, sounding another note of caution about the global economy.

SAUDI: HIGHER OUTPUT MAY BE NEEDED

With a contentious OPEC meeting looming, Ali al-Naimi, Saudi Arabia's oil minister, said OPEC may need to raise its oil output target for the second half of the year.

"Our analysis suggests that we will need a higher ceiling than currently exists," he said in an interview in the Gulf Oil Review.

Saudi Arabia has lifted production sharply to 10 million barrels per day, a 30-year high, in an effort to help bring crude prices down and help nurture a faltering global economy.

Earlier on Monday, OPEC's president signaled the producer group could act to reduce a global supply glut but was unlikely to set country production quotas at the meeting.

Kuwait's oil minister said he believed a discussion about potential output cuts was most likely inevitable.

"With the recent price drop, consensus was emerging for a production cutback, certainly not an increase or talk of one," said John Kilduff, a partner at Again Capital LLC in New York.

IRAN'S NUCLEAR

Iran approaches the OPEC meeting facing tightening U.S.-led sanctions and a European Union embargo on Iranian oil set for July as the dispute over Tehran's nuclear program continues.

Iran's deputy negotiator said world powers were unprepared for the next round of talks over the nuclear issue and had failed to honor agreements reached in previous negotiations, Iranian media said on Sunday.

Iran and the six powers -- the United States, France, Russia, China, Germany and Britain -- will meet for a third time this year in Moscow on June 18-19 to discuss the nuclear issue after making little progress at their most recent meeting.

The U.N.'s International Atomic Energy Agency said its separate talks with the Iranians on Friday were "disappointing," and resulted in no progress toward an agreement on allowing inspectors access to key facilities in Iran.