Oil price rally stalls day after OPEC maneuvering

NEW YORK, Sept. 29 (UPI) -- A day after one of the sharpest rallies for oil prices, markets struggled early Thursday as traders digested the nuances of the latest OPEC maneuver.

Crude oil prices meandered for most of the trading day Wednesday before ministers from the Organization of Petroleum Exporting Countries emerged from meetings in Algeria with an agreement to take extraordinary action intended to pull the market into balance.

OPEC in a statement said members "took into account current market conditions and immediate prospects and concluded that it is not advisable to ignore the potential risk that the present stock overhang may continue to weigh negatively well into the future, with a worsening impact on producers, consumers and the industry."

With an agreement to limit production from member states to between 32.5 million and 33 million barrels per day, crude oil prices shot up nearly 6 percent. By the start of trading Thursday, the sentiment on what that cap meant shifted and oil prices moved into uncertain territory.

The price for Brent crude oil opened relatively even to start the day at $48.73 per barrel. West Texas Intermediate, the U.S. benchmark price for oil, was up 0.4 percent to open the day in New York at $47.24 per barrel.

At the high end, the stated cap could mean OPEC output would be about 2 percent less than August levels. OPEC member Venezuela, before the Algeria meetings, said global crude oil production would need to drop by about 10 percent to pull the market back into balance.

Most analysts said by early Thursday that the move proved OPEC's mettle, but did little to actually change the market dynamics.

In the United States, where shale oil production helped push the market favor toward the supply side, oil production declined only slightly to yield around 8.5 million bpd. Analysis emailed by S&P Global Platts said increased drilling in the United States, however, suggested shale was more resilient to lower oil prices than previously thought.

On the economic front, the U.S. Commerce Department said gross domestic product expanded at a 1.4 percent annual rate, up from the previous estimate of 1.1 percent. Nevertheless, the report suggested sluggishness remained in the U.S. economy.

"The general picture of economic growth remains the same," the report read.

Elsewhere, the U.S. Labor Department showed an increase of 3,000 in the number of first-time claims for unemployment, though the less volatile four-week moving average showed a decrease of 2,250 for the week ending Sept. 24.