Oil fell below $77 a barrel after last week’s rally pushed futures into overbought territory. At the same time, ample crude supplies outweighed military escalation in the Middle East.

While markets were already poised for a correction — with West Texas Intermediate overbought for the last two sessions — OPEC+ exports are further weighing on prices. Overall crude shipments by the producer alliance were broadly unchanged in January, suggesting promised output cuts are slow to materialize, according to market-intelligence firm Kpler Ltd.

Yet traders say a strong US response to escalating conflict in the Middle East could take oil higher. The White House is weighing potential action after Iranian-backed militants killed three soldiers in a drone assault, while Tehran has sought to distance itself from the attack. That followed a Houthi missile strike Friday on a vessel carrying Russian fuel for Trafigura Group, the most significant attack yet on a ship hauling energy products.

US futures have risen about 7% this month as the conflict intensifies, but a well-supplied market is keeping a lid on prices. While the attacks in the Red Sea have led to some re-routing of cargoes — adding to freight costs — they haven’t yet led to shortages or affected production.

Last week as money managers covered short positions, slashing their bearish bets the most since April. But long positions have only increased marginally, which traders say shows a lack of conviction in the recent rally.

“You need people to believe the rally and not just be afraid of losing money,” Rebecca Babin, a senior energy trader at CIBC Private Wealth, said in a phone interview.