Brent crude slipped below $69 a barrel on Tuesday, primarily due to a rally in the US dollar in recent sessions, and expectations of rising production levels in the US.
Brent, the global oil benchmark, slid 0.46% to $68.88 a barrel on Tuesday morning in London as the US dollar continued its rally. Nymex West Texas Intermediate, the US benchmark, fell 0.7% to $65.09 a barrel.
On a trade weighted basis, the US dollar remained subdued, but against both the euro and the yen - two of the world's biggest oil importers - the dollar has gained about 4% during the past three weeks.
Because oil on global markets is priced in dollars, a rally in the US currency makes the commodity more expensive to buy from countries that must also organise foreign exchange transactions for their purchases.
"A key driver in the weakness of crude has been somewhat of a recovery in the dollar," said Hamza Khan, head of commodities strategy at ING.
US oil rig count
Hamza also pointed to a large week-on-week increase in the US oil rig count - a key metric in determining potential rates of future output in the US.
The Baker Hughes US oil rig count rose to 947 on the 26 January, that was up 11 on the previous week, but up a massive 235 on the same week a year ago, when the price of Brent crude was sitting around the $56 a barrel mark.
"The large week-on-week increase in the US rig count, and expectations that the Energy Information Administration will report a stock build in US crude oil inventories this week have also played a role in the price falls," Hamza added.
Rising rig counts have been a product of the rising prices. US unit production costs are higher than those seen in the Arabian and Middle East regions due to labour costs and oil reserves that are more difficult to access.
Rise in US inventories seen
When oil prices reach a certain level it becomes profitable again for shale and oil sands producers to restart production.
While crude inventories in the US have fallen for 10 consecutive weeks, some now expect stockpiles to begin building in the coming weeks - a result of higher production activity in the US.
Possible bullish events on the horizon include political turbulence in Venezuela, as the OPEC member suffers economic crises. Any disruption of Venezuelan export would be felt in the US as its nearest OPEC supplier.