- Oil markets remain supported by OPEC-led production cuts.
- A weakening dollar has also supported crude futures.
- However, U.S. production is expected to hit 10 million barrels per day soon, and Canadian output is also rising.
Brent crude oil prices eased below $70 a barrel on Monday as rising U.S. output undermined efforts led by OPEC and Russia to tighten supplies, but prices were still on track for a monthly gain.
Brent crude futures were down 92 cents, or 1.3 percent, at $69.60 a barrel by 10:58 a.m. ET (1558 GMT), while U.S. West Texas Intermediate (WTI) crude futures fell 79 cents, or 1.2 percent, to $65.35 a barrel.
So far this month, the Brent crude price has risen by 5.5 percent through last Friday’s close.
One of the key drivers has been the dollar, which has lost about 3 percent against a basket of major currencies so far this year.
A falling dollar tends to support oil, which is priced in the U.S. currency, by making it cheaper for holders of other currencies.
Support has also come from a large premium in the front-month Brent oil contract over those for future delivery, as investment in crude futures and options reached a new record high last week.
“The market is bullish. One side that could correct significantly could come from the strength in the U.S. dollar,” PVM Oil Associates strategist Tamas Varga said.
“Undoubtedly, whatever the strategy is of Donald Trump and his finance ministry, they managed to support oil prices in the last week by talking the dollar down, so if we see a big (upward) correction in the dollar then we’ll probably see a (downward) correction in oil.”
In the last couple of months, oil has tended to move inversely to the dollar, as weakness in the currency makes it cheaper for non-U.S. investors in crude to buy and vice versa.
Despite generally bullish sentiment, analysts said the market had been dented by rising output in North America.
U.S. crude production has grown by over 17 percent since mid-2016 to 9.88 million barrels per day (bpd) in mid-January. It is expected to break through 10 million bpd soon.
U.S. energy companies added 12 oil rigs drilling for new production last week, taking the total to 759, energy services firm Baker Hughes said on Friday.
U.S. production is already on par with top exporter and OPEC kingpin Saudi Arabia. Only Russia produces more, averaging 10.98 million bpd in 2017.
There are also signs that Canadian oil production, already at 335,000 bpd, could start to rise as investment in its shale sector picks up. Canada’s overall crude production currently stands at 4.2 million bpd.
U.S. bank JP Morgan said it had increased its 2018 average price forecast by $10 per barrel to $70 per barrel for Brent and by $10.70 per barrel for WTI to $65.63.
“We expect Brent to touch close to $78 per barrel towards end of Q1 2018 or early Q2 2018,” it added.
— CNBC’s Tom DiChristopher contributed to this report.