Oil prices halted their rally on Monday with Brent futures falling below $71 per barrel on signals that Russia may exit production cuts.
Losses were limited by a tightening of global supplies, as output has fallen in Iran and Venezuela amid signs the United States will further toughen sanctions on those two OPEC producers.
Brent crude futures were at $71.15 a barrel at 1330 GMT, down 40 cents, or 0.60 percent, having earlier slid below $71 per barrel. Brent hit its highest since Nov. 12 on Friday at $71.87.
U.S. West Texas Intermediate crude futures were at $63.49 per barrel, down 40 cents or 0.66 percent.
“I would expect oil to trade in a relatively tight band around $70 for the time being,” said Virendra Chauhan, oil analyst at Energy Aspects in Singapore, pointing to differing signs from the United States and OPEC on future supply.
“Leading edge indicators on U.S. supply suggest activity levels are stepping up, which is supportive for strong production growth in the second half,” Chauhan said.
But at the same time, “murmurings from various ministers of the OPEC+ pact suggest supply from the group will not be ramped up pre-emptively as per last summer,” he said.
The Organization of the Petroleum Exporting Countries and its allies meet in June to decide whether to continue withholding supply. OPEC, Russia and other producers are reducing output by 1.2 million barrels per day from Jan. 1 for six months.
OPEC’s de facto leader, Saudi Arabia, is considered keen to keep cutting, but sources within the group said it could raise output from July if disruptions continue elsewhere.
Russian Finance Minister Anton Siluanov said over the weekend that Russia and OPEC may decide to boost production to fight for market share with the United States, but this would push oil as low as $40 per barrel.
U.S. energy companies last week increased the number of oil rigs operating for a second week in a row.
On the bullish side, the head of Libya’s National Oil Corp warned on Friday that renewed fighting could wipe out crude production in the country.
Production has been also falling steeply in Venezuela due to U.S. sanctions. Iranian output is expected to suffer when the United States tightens sanctions on Tehran in May.
“We see a risk of a spike in oil prices by year-end,” said Bank of America Merrill Lynch, citing a weakening dollar and a surge in distillates demand due to rule changes for marine fuels.