Oil prices dropped on Monday morning, receding from last week's 3 ½ year highs. Prices were pressured by a continued increase in u.s. drilling as well as Europe's strong reaction against U.S. President Donald Trump's expected sanctions against Iran. U.S. drillers added 10 rigs last week. At the current level of 844 rigs, the U.S. has the highest stockpile since March 2015. On Sunday the U.S. threatened sanctions on European countries that continue to do business with Iran, though the countries remaining in the Iran deal have shown their commitment to keeping the relationship stable.

According to Reuters, hedge funds and money managers have cut their bullish wagers on U.S. crude in the past week to the lowest level in nearly five months. This could be a sign that traders are concerned about oil's ability to surge higher. Still, those bullish on the oil market credit continuing economic decline in Venezuela and OPEC's production cuts as well as increased demand from China.

U.S. WTI futures were down 26 cents per barrel to $70.44 per barrel as of 2:10 p.m. HK/SIN. Brent crude futures were down 42 cents per barrel to $76.70 per barrel.

Trade Talks Take Center Stage

On the agenda this week are continued trade talks between China and the United States whose express goal is to thaw the brewing trade war between the countries. China has said that its positions will not change, but President Trump has thrown an olive branch by offering support to Chinese tech company ZTE Corp that was significantly damaged last week by a ban in the U.S.

The dollar was broadly lower on Monday, falling against most of its major trading partners. The dollar index was down 0.16 percent to 92.38 .DXY. The greenback was down against the euro to $1.1968. It also eased a modest 0.05 percent against the yen to 109.33. The dollar was pressured by expectations that the Federal Reserve will implement as many as three more rate hikes before the end of the year.