Oil price rally hits a wall

NEW YORK, Aug. 22 (UPI) -- Crude oil prices ended one of their longest streaks of gains in years as doubts over possible production action gained traction in early Monday trading.

Crude oil prices broke through the psychological threshold of $50 per barrel last week, an increase of more than $10 per barrel since Aug. 1, in reaction to comments made by Saudi Oil Minister Khalid al-Falih of "possible action" from major producers.

A so-called freeze proposal was tabled in early 2016 by Russia and members of the Organization of Petroleum Exporting Countries, though that effort collapsed in late spring amid multilateral differences about market share.

An Aug. 9 note from Morgan Stanley said gains since the drop below $40 may have resulted in a false sense of optimism in the energy market. The investment bank cast further doubt about the momentum for crude oil prices, stating in a more recent report that any artificial action to stimulate oil prices by major producers was unlikely. Even if something develops, the bank said production is higher now than when policy efforts surfaced in early 2016.

Crude oil prices started sharply lower in early Monday trading. The price for Brent crude oil was down 2.5 percent in the minutes before the opening bell in New York to $49.59 per barrel. West Texas Intermediate, the U.S. benchmark prices for oil, was off 2.1 percent from the previous close to $47.49 per barrel.

Markets in general may be holding back in anticipation of remarks later this week at an annual gathering of central bank officials in Jackson Hole, Wyo. Though uncertainty about the pace of post-Brexit economic growth in Europe and lingering signs of a slowdown in China and now India are dampening prospects about the global economy, U.S. Federal Reserve Vice Chairman Stanley Fischer said the U.S. economy may be strong enough to withstand a rate hike.

"We are close" to a target core inflation rate of 2 percent, he said in a weekend statement. On the price of oil, Fischer said the slump, relative to 2014 levels, has offered mixed support to the U.S. economy.

"The decline in the price of oil changed from being regarded as a simple reduction in the cost of living of almost all households, and thus an unmitigated blessing, to also being a source of concern, as it was understood that the decline in investment in the production and installation of drilling equipment mitigated the blessing, as did the decline in U.S. oil production," he said.