SINGAPORE - Oil prices on Monday fell away from last week's multi-year highs as a relentless rise in U.S. drilling activity pointed to increased output, while resistance emerged in Europe and Asia to U.S. sanctions against major crude exporter Iran.
Brent crude futures were at $76.65 per barrel at 0415 GMT, down 47 cents, or 0.6 percent from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $70.41 a barrel, down 29 cents, or 0.4 percent.
Brent and WTI last week reached their highest since November 2014 at $78 and $71.89 per barrel respectively, as markets expect Iran's oil exports to fall significantly once U.S. sanctions bite later this year.
"Around a million barrels of oil a day is likely to disappear from global oil markets if the U.S. sanctions on Iran bite," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
"But it is still far from certain that they will bite in the way intended... Germany has said it will protect its companies from U.S. sanctions, Iran has said French oil giant Total has yet to pull out of its fields and all the while it seems the Chinese are ready to fill the void created by the U.S.," he said
Beyond U.S. sanctions, the high oil prices come amid an already tight oil market due to record Asian demand and voluntary output restraint aimed at propping up oil prices led by the Organization of the Petroleum Exporting Countries (OPEC), as well as a group of non-OPEC producers including Russia.
"The (recent) surge in oil prices has been due to a number of factors including strong global economic growth, a falling dollar, an agreement between OPEC and Russia to limit production, economic collapse in Venezuela cutting their production, and bottlenecks in getting U.S. shale oil to market," said David Kelly, chief global strategist at J.P. Morgan Asset Management.
Despite this, markets were held in check by a rise in U.S. drilling for new oil production.
U.S. drillers added 10 oil rigs in the week to May 11, bringing the total count to 844, the highest level since March 2015, energy services firm Baker Hughes said on Friday.
Hedge funds and money mangers slashed their bullish wagers on U.S. crude in the latest week to the lowest level in nearly five months, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday, in an indicator that many financial oil traders are doubtful of significant further price rises.