LONDON, Jan 29 (Reuters): Oil dipped on Monday as soaring North American production was seen undermining efforts led by OPEC and Russia to tighten supplies, but prices were still on track for their strongest start to the year in five years.
Brent crude futures held above $70 per barrel, but eased 23 cents on the day to $70.29 a barrel by 0943 GMT, while US West Texas Intermediate (WTI) crude futures were at $66.24 a barrel, up 10 cents.
So far this month, the Brent crude price has risen by 6.3 per cent, making this its largest rise in January since 2013.
One of the key drivers has been the dollar, which has lost 3.2 per cent against a basket of major currencies so far this year, a decline that was exacerbated last week when US Treasury Secretary Steven Mnuchin suggested President Donald Trump's administration favoured a weaker currency.
A falling dollar tends to help support the price of oil and coupled with a large premium in the front-month Brent oil contract over those for future delivery, investment in crude futures and options reached a new record high last week.
"The market is bullish. One side that could correct significantly could come from the strength in the US dollar," PVM Oil Associates strategist Tamas Varga said.
"Undoubtedly, whatever the strategy is of Donald Trump and his finance ministry, they managed to support oil prices in the last week by talking the dollar down, so if we see a big (upward) correction in the dollar then we'll probably see a (downward) correction in oil."
In the last couple of months, oil has tended to move inversely to the dollar, as weakness in the currency makes it cheaper for non-US investors in crude to buy and vice versa.
However, despite generally bullish sentiment, analysts said the market had been dented by rising output in North America.
