Prices have strengthened following talks of a production freeze, with a producers meeting mooted on March 20 in a bid to ease a global supply glut that has depressed the market.
Sentiment has also been boosted by strong US jobs growth data and a weaker greenback which makes dollar-priced oil cheaper, perking up demand.
US benchmark West Texas Intermediate (WTI) for delivery in April slid 39 cents to $37.51 and Brent crude for May fell 52 cents to $40.32 a barrel.
Brent closed at $40.84 a barrel in London on Monday, its highest since early December.
“With prices going up so much, there’s of course quite a bit of profit-taking,” said Daniel Ang, an analyst with Phillip Futures in Singapore.
“Selling pressures may be coming from hedges as well. Now that prices are up to $40, most of them could be selling off to hedge future production,” he told AFP.
Ang predicted that the bullish momentum would continue should prices break the $41 mark, but said a sustained increase would only be driven if producers took concrete steps to ease the oversupply.
“Fundamentals have not really changed. Prices have to be driven from fundamental change. A cut in production or a concrete freeze by these players could cause prices to move up further,” he added.
Saudi Arabia, Russia, Qatar and Venezuela last month agreed to freeze output at January levels if other producers followed suit.
United Arab Emirates’ energy minister Suhail Mazrouei also said Monday current prices “are forcing everyone to freeze. So I think it is happening as we speak”.
But British bank Barclays cautioned against putting too much optimism about the proposed production freeze.
“OPEC’s production freeze policy is far from certain to succeed,” it said in a market commentary, referring to the Organization of the Petroleum Exporting Countries.
“The market is well aware that the countries that have so far signaled support for the policy are mostly producing at close to capacity… The big risk is that the meeting proves a disappointment and prices fall back sharply on any lack of further progress.”
