NEW YORK (Reuters) - Oil prices fell nearly 2 percent ahead of monthly contract expiration on Monday, pulling back from last week’s rally built on signs the global market is starting to rebalance from chronic oversupply.

FILE PHOTO - A gas pump is seen hanging from the ceiling at a petrol station in Seoul June 27, 2011. REUTERS/Jo Yong-Hak/File Photo

Brent crude futures LCOc1 settled down 2 percent, or $1.06 at $51.66 a barrel, while U.S. West Texas Intermediate crude futures CLc1 ended down $1.14 a barrel, or 2.4 percent, at $47.37 a barrel ahead of the September contract's expiration on Tuesday.

Both contracts had risen 3 percent on Friday, and traders said the day’s action was marked by profit-taking.

“Oil prices are experiencing some late summer chop with low trading volume and not much news. I think we are going to be stuck in a neutral for the next two weeks without big moves in either direction,” said Joe McMonigle, senior energy analyst at Hedgeye.

U.S. hedge funds and money managers have reduced bets on rising prices in recent weeks, Commodity Futures Trading Commission data showed on Friday.

U.S. oil prices have been on the upswing since bottoming out near $43 a barrel in mid-June, though the market has not been able to sustain a rally above $50. Despite the selloff, the market remains in its recent range, said Phil Flynn, analyst at Price Futures Group in Chicago.

The world remains awash with oil despite a deal struck by some of the world’s biggest producers to rein in output. Rising U.S. production has been a major factor keeping supply and demand from balancing.

U.S. output may soon slow, as energy companies cut rigs drilling for oil for a second week in three, energy services firm Baker Hughes said on Friday. RIG-OL-USA-BHI

Crude stockpiles are forecast to have declined by 3.4 million barrels for the week to Aug. 18, according to a Reuters survey, which would be the eighth straight week of declines.

U.S. commercial crude inventories have fallen almost 13 percent from their March peaks to 466.5 million barrels. C-STK-T-EIA

The oil minister of Kuwait, which is participating in OPEC-led production cuts, said U.S. crude stocks were falling more than expected because output cuts were taking effect.

Azerbaijan, not an OPEC member but one of the countries which has committed to production cuts, remains committed to reducing output, the head of state oil company SOCAR told Reuters.

Libya’s National Oil Corp declared force majeure on loadings of Sharara crude from the Zawiya oil terminal on Sunday.