May 25 (UPI) -- The likelihood that parties to an OPEC-led effort to balance the market with production cuts stand pat on output left oil prices in the red early Thursday.
Ministers assigned to a joint committee monitoring an agreement to sideline 1.8 million barrels per day to balance an oversupplied market left a meeting Wednesday with a recommendation to extend the deal for nine months. That proposal first surfaced last week by Russia and Saudi Arabia.
Formal negotiations over the terms of the agreement were still under way in the minutes before the start of trading in New York. Parties to the agreement, which includes producers outside the Organization of Petroleum Exporting Countries, may have to consider which parties cut production, by how much and for how long. New producers may add their name to the agreement and exemptions for OPEC members Libya and Nigeria could complicate an easy outcome.
When negotiations for the initial deal emerged late last year, OPEC saw its membership decline by one member after Indonesia was suspended from the group. This time, a name was added to the list as Equatorial Guinea became the newest member.
Though negotiations are ongoing, it's widely expected that parties to the agreement will extend the provision by nine months, or possibly longer. Rumors had circulated earlier in the trading week that deeper cuts were on the agenda.
"Talk of an extension of a cut for 12 months and even rumors of a deeper cut, seem a bit less likely," Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, said in a daily newsletter.
That disappointed traders betting on positive pressure from the easing of supply-side strains. The price for Brent crude oil was down about 1.1 percent a half hour before the start of trading in New York to $53.37 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 1.3 percent to $50.69 per barrel.
A report published after the close of U.S. trading Wednesday from analytical group Wood Mackenzie found only muted support for crude oil prices regardless of the outcome of the meetings in Vienna. A nine-month extension would encourage an average price for Brent of around $55 per barrel this year and more aggressive action would add a $5 per barrel premium to that forecast.
In his opening remarks, OPEC President and Saudi Oil Minister Khalid al-Falih said the agreement was working to offset the supply-side strains, which have emerged more recently from U.S. shale production.
"The market is now well on its way toward rebalancing," he said. "We have more work to do in lowering inventories toward the last five-year average, but we are on the right track."
U.S. data this week show the steady drawdown in commercial crude oil inventories is continuing, but consumer fuels still show only minor decreases despite lower gasoline prices.
The downturn for crude oil prices could be getting support from underlying economic figures in the United States, the world's leading economy. The Labor Department reported first-time claims for unemployment for the week ending May 20 increased by 1,000, a rise that followed three consecutive weeks of declines.