Oil falls as traders cash in after three weeks of gains

Oil prices dipped on Monday as traders took profits after three weeks of gains and as a jump in the dollar late last week was priced into fuel markets.

Front-month Brent crude was trading at $44.80 per barrel at 0710 GMT, down 31 cents from its last settlement.

U.S. West Texas Intermediate (WTI) futures were down 35 cents at $43.38 a barrel.

Analysts said the price drops were a result of cashing in after three weeks of rising prices.

"I guess (there`s been) some profit taking after a strong rally into the end of last week," said Virendra Chauhan of Energy Aspects in Singapore.

Market data shows that the amount of open positions betting on rising WTI prices rose to levels last seen in June 2015 last week, while bets taken out in expectation of falling prices fell close to 2016 lows.

Traders also said oil fell on a jump in the dollar on Friday against a basket of other leading currencies on expectations that Japan will further extend its aggressive monetary easing through negative interest rates.

A stronger dollar, in which oil is traded, makes fuel imports for countries using other currencies more expensive, potentially hitting demand.

"Fundamentals remain bearish and are set to deteriorate further, especially if prices move higher," Morgan Stanley said on Monday.

The bank 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 Organization 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.

Barclays bank said it was "not yet convinced that prices will remain here or go even higher" 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 said, Monday`s oil price decline came despite another cut in the U.S. rig count that brings activity down for a fifth straight week and to levels last seen in November 2009.

A total of 343 rigs were drilling for new oil last week. That compares to over 700 this time last year, according to oil services company Baker Hughes on Friday.