Oil prices ended down on Friday and broke a four-week winning streak after a rally that had taken benchmarks to three-year highs, as investors sold positions on re-emerging US production concerns.
Brent crude futures fell 70 cents, or 1 per cent, to settle at $68.61 a barrel after hitting a session low of $68.28. On Monday, they hit their highest since December 2014 at $70.37.
US West Texas Intermediate (WTI) crude futures settled at $63.37 a barrel, down 58 cents, or 0.9 per cent. WTI marked a December-2014 peak of $64.89 a barrel on Tuesday.
On a weekly basis, Brent settled 1.8 per cent lower while WTI was down 1.5 per cent.
"We had such a meteoric rise in the oil market recently and we were overbought quite a bit. This is the first time we’ve taken a breath," said Phil Flynn, analyst at Price Futures Group in Chicago.
"The pullback in relationship to the recent run-up is still very modest," he added.
The International Energy Agency (IEA) said in its monthly report that global oil stocks have tightened substantially, aided by Opec cuts, demand growth and Venezuelan production hitting near 30-year lows.
But it warned that rapidly increasing production in the United States could threaten market balancing.
"Explosive growth in the US and substantial gains in Canada and Brazil will far outweigh potentially steep declines in Venezuela and Mexico," the IEA said of 2018 production.
The energy watchdog forecast US supply growth will push its output past 10 million barrels per day (bpd), overtaking Saudi Arabia and rivalling Russia.
US crude oil production rose nearly 300,000 bpd to 9.75 million bpd last week, according to government data.
The US oil rig count, an indicator of future production, fell by five this week but at 747, was still much higher than the 551 rigs a year ago, according to General Electric Co's Baker Hughes energy services firm.
"The drop in the rig count should place a little bit of doubt about the IEA’s forecast of explosive growth. People are starting to really question the validity of demand," Flynn said.
Overall, however, oil prices remain well supported, and most analysts do not expect steep declines.
Hedge funds have been increasing long positions steadily on expectations that tightening supply will keep prices buoyant. Money managers raised their net long US crude futures and options positions in New York and London by 40,855 contracts to 541,990 in the week to January 16, a record high, the US Commodity Futures Trading Commission said.
In a separate report, Intercontinental Exchange Inc said speculators trimmed positions in Brent in the week to January 16 from a record the week before, dropping 3,357 contracts to 570,795.
The main price driver has been a production cut by major producers led by the Organization of the Petroleum Exporting Countries (Opec) and Russia since January last year.
The supply cuts, scheduled to last throughout 2018, were aimed at tightening the market to prop up prices.
Even in the United States, not part of the pact to curb output, crude inventories fell 6.9 million barrels last week to 412.65 million barrels, the lowest seasonal level in three years and below the five-year average marker around 420 million barrels.