Oil Down on Trader Profit Taking

Expected rise in OPEC supply to weigh; U.S. rig count down to 2009 levels.

Oil prices slipped on Monday as traders took profits after three weeks of gains and as a jump in the dollar late last week was priced into fuel markets.

Front-month Brent crude was trading at $44.80 per barrel at 1101 GMT, down 31 cents from its last settlement.

U.S. West Texas Intermediate (WTI) futures were down 44 cents at $43.29 a barrel.

Analysts said the price drops were a result of cashing in after three weeks of rising prices.

"It's more of a correction since we have no important data today and we've seen quite some gains in the past few weeks," ABN Amro chief energy economist Hans van Cleef said.

Market data shows that the amount of open positions betting on rising WTI prices rose to levels last seen in June 2015 last week, while bets taken out in expectation of falling prices fell close to 2016 lows.

"Speculative financial investors are likely to take advantage of this opportunity to take profits after prices rose last week to 4-and-a-half month highs, mainly thanks to their own actions," Commerzbank said in a daily note.

Traders also said oil fell on a jump in the dollar on Friday against a basket of other leading currencies on expectations that Japan will further extend its aggressive monetary easing through negative interest rates.

A stronger dollar, in which oil is traded, makes fuel imports for countries using other currencies more expensive, potentially hitting demand.

The dollar index was trading a modest 0.2 percent lower on Monday.

Morgan Stanley (MS) said that a recent rally was largely fuelled by investment by hedge funds and that the price gains resulting from these inflows were not supported by fundamentals as production by the Organization of the Petroleum Exporting Countries (OPEC) was likely to increase while slowing economic growth, including in emerging markets, could hit oil demand.

"A macro unwind (of its positions) could cause severe selling given positioning and the nature of the players in this rally," Morgan Stanley said.

Indonesia's governor to the Organization of the Petroleum Exporting Countries said on Monday that oil at $45 a barrel was "not bad" and that there would be no urgency to freeze output levels if crude remained at that price.

Barclays bank analysts said they were "not yet convinced that prices will remain here or go even higher", however, as fundamentals remained weak.

"Still-elevated inventory levels, the return of some disrupted supply, further boosts to Saudi and Iranian supply, and increased non-OECD product exports all have the potential to move prices lower over the next several months, especially if broader macro sentiment shifts," it said.

That said, Monday's oil price decline came despite another cut in the U.S. rig count which brings activity down for a fifth straight week to levels last seen in November 2009.

By Sarah McFarlane