LONDON: Oil prices slumped Monday as traders took profits on receding prospects of an imminent cut to the global supply glut.
Prices hit three-week highs earlier Monday, building on last week's strong gains driven by dollar weakness and after Russia said it could meet the OPEC producers' group for talks on possible output cuts.
But they sharply reversed direction as analysts further doubted a looming reduction in the amount of oil being pumped out by leading producers.
Around 1700 GMT, US benchmark West Texas Intermediate for delivery in March slumped to $31.84 a barrel, down $1.78 compared with Friday's close.
Brent North Sea crude for April delivery shed $1.46 to $34.53.
Brent had earlier Monday struck a three-week high at $36.25 before profit-taking took hold.
"Crude oil has started the new week on the back foot, giving back a big chunk of the sharp gains made in the previous couple of weeks," said Fawad Razaqzada, analyst at City Index.
"Profit-taking is one of the main reasons for the oil price drop today," he added.
Analysts cautioned against putting too much hope on talks between non-OPEC crude producer Russia and the cartel on reducing output in a move that could support prices.
Crude futures have crashed by about three quarters since mid-2014 owing to global oversupply, weak demand growth and strong dollar.
But both contracts surged Thursday after Russian reports that Energy Minister Alexander Novak had said Moscow was ready to take part in talks with OPEC to establish possible "coordination".
He said the discussions could be on making production cuts of up to five percent per country.
"Oil has stopped its bullish momentum and most of the reason comes from the relatively strong dollar on light of Japan's surprising negative interest rate decision," said Phillip Futures analyst Daniel Ang.
As oil is traded in dollars, a rise in the greenback makes crude more expensive for holders of weaker units, dampening demand.
Oil prices closed higher last week to end a turbulent January in which prices plunged to 12-year lows.
The dollar has meanwhile gained support after Japan's central bank shocked markets Friday with a decision to adopt a below-zero interest rate policy to spur bank lending and drive up inflation.
Bank of Japan chief Haruhiko Kuroda cited recent financial market turmoil and a China slowdown for ushering in a -0.1 percent rate on new reserves, and said the bank may go even further into negative territory.
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