Oil prices slipped on Monday after Brent hit $70 a barrel as data showed an accelerating economic recovery in China, which was offset by fears of inflation.
Brent crude futures for May were at $68.44, down 78 cents a barrel or 1.1 percent by 1327 GMT while US West Texas Intermediate crude for April was at $64.85 a barrel, down 76 cents or 1.2 percent.
A massive US stimulus package passed this month, raising prospects for global economic growth but also inflation.
Still, analysts said a pact by top producers to rein in output and a rebound to demand due to vaccine roll-outs will keep pushing prices upwards despite any temporary setbacks.
“The inflation genie has found life rather uncomfortable in its bottle,” said senior market analyst at OANDA Jeffrey Halley.
“Futures spreads remain in backwardation, and dips in prices remain shallow and short-lived,” he added, referring to a market structure in which the current value is higher than prices for later, encouraging oil sales. “Both (benchmarks) will find a procession of willing buyers if those regions are visited.”
China’s industrial output growth quickened in January-February, beating expectations, while its daily refinery throughput data rose 15 percent from the same period a year earlier, data showed.
“There is increasing confidence that global oil demand is rebounding as US Covid-19 death toll is decreasing while China’s apparent oil demand rebounded,” said SEB chief commodity analyst Bjarne Schieldrop.
Further supporting prices, top oil exporter Saudi Arabia has cut the supply of April-loading crude to at least four north Asian buyers by up to 15 percent, while meeting the normal monthly requirements of Indian refiners, refinery sources told Reuters on Friday.
The supply cuts come as the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, decided earlier this month to extend most of its supply cuts into April.
Earlier in February, the United States overtook Saudi Arabia to be India’s second-largest supplier, data from trade sources showed.
Separately, US energy firms have cut the number of oil and natural gas rigs operating by one in the first weekly drop since November, according to Baker Hughes Co.