Oil falls to $69 as earlier rally fizzles

Oil fell to around $69 a barrel on Monday, reversing an earlier rally, as a rise in Russian production and concern about a U.S.-China trade spat offset a drop in U.S. drilling activity.

U.S. drillers cut seven oil rigs in the week to March 29, bringing the total down to 797, the first decline in three weeks. The rig count is closely watched as an indicator of future U.S. oil output.

Brent crude LCOc1, the international benchmark, fell 56 cents to $68.78 a barrel by 1358 GMT, having rallied to $70.04 earlier. U.S. crude CLc1 slipped 75 cents to $64.19.

“Investors took their cue from falling U.S. drilling counts,” said Wang Xiao of Guotai Junan Futures. “But increasing trade friction between China and the U.S. is likely to rock global markets and tarnish bullish sentiment in crude oil markets.”

China increased tariffs by up to 25 percent on 128 U.S. products from Monday, escalating a spat between the world’s biggest economies in response to U.S. duties on imports of aluminum and steel.

Trading volumes were lower than normal as many countries were still on Easter holiday.

Brent crude reached a 2018 high of $71.28 in January but has since struggled to rise above that level. Two rallies last week ran out of steam just beyond $71, a chart pattern known as a double top which is usually bearish.

Some analysts say prices are set for further gains, as concerns that Washington could reintroduce sanctions against Iran lend support.

But Russian oil output rose in March despite the output deal, to 10.97 million bpd from 10.95 million bpd in February, Russian energy ministry data showed.