Crude oil prices apparently found the direction they were looking for Wednesday, moving lower amid uncertainty about the impact of OPEC maneuvering.
Oil prices posted wide swings in trading Tuesday as investors tried to guess what would happen next as members of the Organization of Petroleum Exporting Countries started preparations for meetings next week on a production proposal.
OPEC members are working on a proposal that calls for cuts for each member state by between 4 percent and 4.5 percent, with war-torn countries Nigeria and Libya getting exemptions. That's ruffled the feathers of Iraq and Iran, which are jockeying for a stronger market share.
Olivier Jakob, managing director of Switzerland-based consultant Petromatrix, said Iran is one of the members of OPEC least exposed to the pressure from lower crude oil prices because of the economic adjustments it made under sanctions pressure.
A research note from Goldman Sachs said OPEC will likely announce a formal deal next week, but any price reaction will be short term. The price for Brent crude oil will likely peak at $55 per barrel in the first half of next year, which would be high enough to kick-start shale oil production in the United States and put negative pressure on oil prices in the latter half of 2017.
Crude oil prices sank on a light trading day ahead of the Thanksgiving holiday in the United States. The price for Brent crude oil, which this week flirted with $50 per barrel, was down 0.6 percent to start trading at $48.83 per barrel. West Texas Intermediate, the U.S. benchmark price for oil, was down 0.8 percent to open the day in New York at $47.65 per barrel.
Markets were facing headwinds at the start of trading in New York after the British government said there was a pressing need to address economic weakness compounded by pressures from the decision to leave the European Union. While the economy has so far defied expectations, the so-called Autumn Statementdowngraded the growth forecast for 2017 from 2.2 percent to 1.4 percent.
In the United States, the Labor Department reported an increase in first-time claims for unemployment for the week ending Nov. 19 of 18,000. The less-volatile four-week moving average, meanwhile, moved lower by 2,000 suggesting the U.S. labor market was tightening.
Markets could be influenced later in the morning after the U.S. Energy Information Administration releases weekly data on production and supply levels. Industry data from the American Petroleum Institute published late Tuesday show U.S. crude oil inventories declined by about 1.3 million barrels last week.
By Daniel J Graeber