Oil hit $71 a barrel before retreating on Tuesday, supported by concern about possible disruption to Middle East supply but capped by fast rising global output and a dollar recovery.
Brent crude futures were up 18 cents at $70.30 by 1404 GMT, down from its brief high. West Texas Intermediate (WTI) futures slipped 6 cents to $65.49, after touching $66.41.
The dollar recovered from earlier lows, erasing some gains in oil, which had neared its highest since late January.
“For oil, we expect the supply deficit of the past couple of quarters to give way to a surplus, driven largely by strong growth in U.S. tight oil supply,” Barclays Research analysts said in a note, a reference to U.S. shale production.
“Supply risks in Venezuela and Iran may perk up the patient, but we do not expect them to change the market balance significantly,” they wrote.
The Organization of the Petroleum Exporting Countries, Russia and others began their supply curbs in January 2017. The deal is due to expire at the end of 2018.
Saudi Crown Prince Mohammed bin Salman told Reuters that OPEC and Russia were working on a long-term deal to cooperate on oil supply curbs that could extend controls over supplies by major exporters for years to come.
Geopolitical factors have also offered support. The United States has threatened to withdraw from a nuclear deal that Iran signed with Washington and other world powers in 2015, setting a deadline of May and raising the possibility of sanctions on Tehran that could hinder oil exports.
But supplies from non-OPEC nations, especially the United States, are growing, which could prevent the market tipping into deficit, analysts said.
“The recent rally in oil prices might have taken some by surprise as the underlying fundamental picture does not justify Brent being close to $70 a barrel. This view is based on the simple fact that non-OPEC oil supply growth will trump the increase in global oil demand this year,” PVM Oil Associates analyst Tamas Varga said