According to Reuters, oil prices fell on Monday following traders cashing out profits after three weeks of gains and as a jump in the dollar late last week was priced into fuel markets.
At the beginning of the month Brent crude LCOc1 was trading at US$44.60 (£31) /bbl at 0934 GMT, down 51 cents from its last settlement.US West Texas Intermediate (WTI) futures were down 63 cents at US$43.10 a barrel.
Analysts claim that the price drops were a direct result of cashing in after three weeks of rising prices.
Market data demonstrates that the amount of open positions betting on rising WTI prices rose to levels that were last recorded in June 2015 last week, meanwhile bets taken out in expectation of falling prices fell close to 2016 lows.
Traders also reported that oil fell on a jump in the dollar on Friday .DXY against a basket of other leading currencies on expectations that Japan will seek to further extend its aggressive monetary easing through negative interest rates.
Due to the stronger dollar, fuel imports for countries using other currencies is becoming more expensive, potentially hitting demand.The dollar index .DXY was trading a modest 0.2% lower on Monday.
Production freeze not necessary
Morgan Stanley said that a recent rally was largely fuelled by investment by hedge funds and that the price gains resulting from these inflows were not supported by fundamentals as production by the Organisation of the Petroleum Exporting Countries (OPEC) was likely to increase while slowing economic growth , including in emerging markets, could hit oil demand.
"A macro unwind (of its positions) could cause severe selling given positioning and the nature of the players in this rally," Morgan Stanley said.
Indonesia's governor to the Organisation of the Petroleum Exporting Countries was quoted on Monday as saying that at US$45 a barrel was “not bad" and that given this figure there was no immediate need freeze output levels if crude prices remained steady.
According to Barclays bank analysts, they were "not yet convinced that prices will remain here or go even higher", however, as fundamentals remained weak.
"Still-elevated inventory levels, the return of some disrupted supply, further boosts to Saudi and Iranian supply, and increased non-OECD product exports all have the potential to move prices lower over the next several months, especially if broader macro sentiment shifts," it said.
That being said, Monday's oil price decline came in the wake of another cut in the US rig count which further brings activity down for a fifth straight week to levels last seen in November 2009.
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