An increase in US drill rig count has caused oil prices to slip from their highest levels in more than three and a half years.
The decline in the prices is also a result of resistance developed by European and Asian markets to US sanctions against major crude exporter Iran.
Brent crude futures, the international benchmark for crude prices, declined 40 cents to trade at $76.72 per barrel, while US light crude oil dropped 35 cents to reach $70.35, according to Reuters.
The fall in prices comes after both futures touched their highest levels since November 2014 last week at $78 and $71.89 a barrel respectively, on account of expectations that Iranian crude exports would decline once US sanctions are imposed later this year.
Quoting different market sources, the news agency reported varying levels of impact of the sanctions on Iran crude exports.
While a section of the analysts stated that Iranian exports will fall by as little as 200,000 barrels per day, others projected a reduction of around one million barrels per day.
Futures brokerage AxiTrader chief market strategist Greg McKenna was quoted by the news agency as saying: “Around a million barrels of oil a day is likely to disappear from global oil markets if the US sanctions on Iran bite.
“But it is still far from certain that they will bite in the way intended. Germany has said it will protect its companies from US 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 US.”
Soaring US production is posing challenge to efforts taken by the Organization of the Petroleum Exporting Countries and other producers such as Russia to tighten the market.
Based on data released by Baker Hughes, the number of US drill rigs increased by ten in the week ending 11 May.
The total US rig count now stands at 844, which represents the highest level since March 2015.