Oil prices fell on Monday after an increase in US drilling activity, but held near recent three-month highs on hopes for a trade deal between the United States and China.

Brent crude was down 22 cents, or 0.33 per cent, at $65.92 per barrel by 0742 GMT in thin trading ahead of the Christmas holiday. West Texas Intermediate was down 25 cents, or 0.41 per cent, at $60.19 a barrel.

Oil prices have risen since the two nations signed a so-called phase one trade deal earlier this month following months of tit-for-tat negotiations that unsettled markets.

Under a deal due to be signed in January…